Make Money Trading Options summary

Actually, quite a lot could go wrong in the previous scenario. 

Many novice traders, eager to make a quick buck, still confuse options with stocks. Instead of purchasing 50 shares, they accidentally buy 50 options. 

Now that you have a better grasp of call and put options, you might be anxious to get started. It seems simple enough, as long as you don’t confuse shares with options, and you keep track of the money at risk for each trade.

But there’s one more key difference between stocks and options that influences your profits – or losses – over time. 

The risks and complications of trading options can be daunting. But if managed correctly, options can be an excellent way to increase your income or savings. 

In some cases, like gambling on horse races, you’re not permitted to change your bet after the starting bell rings. 

When it comes to your Watch List, the stocks you add should meet a few criteria. Remember that these are the companies whose stocks – or options – you’re considering buying and selling. 

These stocks should be at least $50 per share, and should be among the most actively traded stocks on the market. They should be held in mutual funds, indexes, banks, and hedge funds. A powerful Watch List contains many highly successful companies like Apple, Amazon, IBM, Mastercard, Netflix, or Tesla. 

The clock strikes 9:30 a.m., and the race is on. By keeping a close eye on the purchased stocks in your trading account, you can begin to separate the wheat from the chaff in real time. 

It’s tempting to get caught up in the acrobatics of early morning trends: certain stocks will surge, others will plunge, and some won’t move much at all. As the morning progresses, the true winners will emerge with more stable gains.

There’s one final check to do before you buy any call options for each winning stock in your real brokerage account. 

You’ve left the paper trading account behind for now, and are about to use – and risk – your own money. If you don’t dot your i’s and cross your t’s, you could be in for some very expensive surprises. Surprises can be exciting, but not when they involve losing large sums of money.

At this point, you’ve identified a winning stock trending upwards, and have bought a call option. Of course, like any investment strategy, the Test Trading Strategy has risks, too.

A stock might have passed all of your tests. Perhaps it survived your five-call probes, and, thanks to your Five-Minute Rule checklist, everything is set.