Should I start in Options?

[Manjit625]

Hey Everyone --

I am a new investor, (high school). My dad and I are investing by picking a couple of stock and add to them every couple of months or so. In my online brokerage account they mention I can trade Options as well. I have done the research on Options and know just the basics. My dad and I were going to throw $500 in together to try out options -- is this worth it or stick with stocks?
Please let me know what you think, it would be very helpful
Thanks

[aiki14]

There has been a lot of talk about options on the forum lately. While it is possible to greatly enhance a winning position with options it is better to use them to protect underlying stock positions. If you are looking for some leverage you can use margin with less risk. You do have to apply for both and your broker has to OK you.

[loslobos71]

I think that you should wait until you have a better feel for the market to trade in options. What stocks do you own ?

[chinaman711]

Stick with stocks, you have lots of time to learn the options game.

[robvia]

$500 isn't a lot to play with. You could get 1 or 2 contracts on a low priced stock just to try it. The best advice is to buy a deep in the money call that is 6 months out. Lenny Dykstra had a bunch of articles on thestreet.com explaining how the delta works, but he's disappeared. February is usually a bad month, so it may be good to wait for something to bottom. I've done ok with options, also started with my father who is on the account with me.

[cryder17]

I am about to allocate about half my portfolio funds into covered calls. great way to reduce risk in my opinion. luckily i am going to be able to use investools to gather information on the options, couldn't imagine using this strategy without having the research and info investools offers.

[aiki14]

Originally Posted by cryder17

I am about to allocate about half my portfolio funds into covered calls. great way to reduce risk in my opinion. luckily i am going to be able to use investools to gather information on the options, couldn't imagine using this strategy without having the research and info investools offers.

What do you mean by that? Are you using half your positions to back the calls? What funds do you need for this? What stocks are you using and why?
I don't mean to sound interrogatory, I am interested in how you plan on going about this and the reasons for selling contracts on one stock over another.

[Manjit625]

Hey..The top 5 of my positions are:

NYX
MO
T
CSCO
GS

These are my top 5, with other stocks as well.

I was looking at AT&T and it's projected future within the next 12 months, and was thinking about options. In our account together we have around $5,000 so Its not a low amount. I was just saying using $500 for the first purchasing a CALL
Let me know what you think

[discrat]

I remember back about 6 years ago I started out with exactly the same amount of $500 in trading options. In the first 1 month and a half I turned it in to just over $4,000. Then proceeded to lose it all on 2 to 3 more Option trades.
Then 2 years later started out with $3,500 and turned it into 11k in 2months. I was stupid once again as I pyramided my winnings into just a couple of trades. And lost everything again on 3 trades. They were calls on YHOO,JNPR, and MSFT.
Just terrible strategy on money management and position sizing on my part.
This engrained in my mind the importance of these two variables. And have NOT looked back since with my trading.


Personally, I think some do profit in long term with Options. But they are far and few between. With time decay on a option contract and overnight exposure that can take Premiums way way down (and very hard to bring it back up) there is too much risk involved. I believe it to be a losing proposition for most people over time.

Stay away !! At least until you have more experience trading stocks. And then only do it with a small amount of your total equity like did a few years ago.