How to Trade Options and Options Basics


Options Trading Ticker Sign
Traders reviewing charts
What is a day-limit order in options trading?
A day-limit order is a type of order entered through a broker that expires at the close of business on that day. If it is not filled, you must place a similar order on the next trading morning.
Trader celebrating in front of trading screens
What is worse, exiting a trade too soon or too late?
POP QUIZ: WHAT'S WORSE, EXITING A TRADE TOO SOON OR TOO LATE? It's a familiar scene: you plan a profit target on a long call trade, say 50%.
Trader reviewing trading charts
Is it just me, or is the win rate for options buying hard to stomach?
Taking losses is very difficult for all new options traders to accept at first, including us! As kids in school, we all learn that in order to be considered successful, we need to get 95% of the questions correct and earn an A.
Two traders working together
What is a weekly option?
As the name implies, "weekly" options are those that expire on Fridays outside of the traditional monthly expiration week (normally the third Friday of each month). Weekly calls and puts are available on a wide variety of popular stocks, which means that every week is an options expiration week when you are trading weeklies.
Two young traders breaking down strategies
What is a covered call?
In a covered call strategy, a shareholder sells (or writes) a call option against one of his or her stock investments. To ensure all of the calls are "covered," as opposed to "naked," no more than one call option is sold per 100 shares of stock.
Volatility, VIX, Volatility Index, Cboe Volatility Index, Stock Market Volatility
What is the VIX (CBOE Volatility Index)?
The market “fear gauge”
Risk Management in Options Trading
What is convexity and what is truncated risk?
Convexity, when buying options, means your downside is capped and your upside is UNLIMITED. Truncated risk, when buying options, means that your risk is limited to your initial investment.
Portfolio growth through options trading
What kind of win-rate can I expect with options?
You Can Be Successful with a Winning Percentage of Under 50%The principles of money management in options trading cannot be mastered without a firm grasp of the statistical probabilities involved. In his esteemed book, Trading for a Living, Dr.
Trader reviewing multiple charts
Why should I trade options instead of stocks?
The major benefits of options relative to trading stocks or funds are: Options require less capital; you'll have fewer total dollars at risk in the market. These leftover dollars can be placed in safe investments such as a money- market fund.
Female trader with multiple screens
What is an option?
It's more than just an offensive football play, as Merriam-Webster's Collegiate Dictionary likes to describe it. An option is an investment contract that allows an investor to buy or sell a set amount of an underlying security at a predetermined price and by a predetermined date.
Traders reviewing price action charts
What are binary options?
*NOTE: Schaeffer's does not endorse the usage of binary options. This answer is purely informational as we are regularly asked about binaries by our clients* Binary options are a type of exotic option that offers traders an all-or-nothing payoff -- you either win or lose.

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