Welcome to part two of a video series of six on how to trade options successfully. There is some really good advice in these articles and videos, and if you are seriously interested in becoming a successful options trader, then I highly recommend that you spend one hour of your life watching these videos. You can find them all on You Tube.
One very important step in becoming a better options trader is to spend ample time back testing. Currently there are just a few option software programs on the market that can help you achieve this task, but back testing is worth your time. I personally learned a lot by using Optionvue as well a Think or Swim to back test my option strategies. Although, the previously mentioned software\’s are very good, San Jose Options has just released a new type of back testing tool called the Options Toolkit. This back tester saves you a lot of time when compared to any other options that testing software.
For example, it used to take me one hour to back test one year of trading a Condor in the Optionvue software. Using Thinkorswim it\’s a little bit faster. Now, in comparison, to do the same job and actually gather more organized data, it takes about 2 seconds to back test one year in the Options Toolkit. It\’s really phenomenal.
Experience is another key to finding success as an options trader. The reason is that the stock market changes constantly, and if you do not have years of experience, you will always be surprised by the next move. Having experience helps understand the market in a deeper way which is very important when it comes to making adjustments on your option trades. Experience traders also do not panic like to beginners do, and this can really make a big difference at the end of the year.
Paper trading will also help you to become a better options trader. Many option brokers on the market give you a free paper trading account just buy applying. Thinkorswim has one of the nicest option trading platforms on the market and they give you a very realistic paper trading account. It\’s actually exactly like a real account, however, sometimes the fills are easier, but sometimes they are not. So overall it\’s an excellent way to practice without risking any money. Obviously, it\’s a good idea to wait to use real money until you can produce consistent returns in your paper trading account.
In the last part of this video we discuss why it\’s important to keep about 25% of your money in cash. Good option traders know how to make adjustments, they know how to lock in profits, and they need this money to do just that. It\’s never a good idea to use up all of your capital in your trading account. This can lead to serious problems. So again, if you want to become a good option trader, then leave plenty of money in cash so you can always do what you need to do.
For The Best Education in Option Trading go to the San Jose Options Course at www.sjoptions.com
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