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Getting started with options trading is as easy as following these five simple steps:
- Learn the basic options vocabulary
- Open an options trading account
- Paper trade a few times to get it right
- Create a trading strategy and stick to it
- Re-evaluate your strategy at regular intervals
Getting familiar with the options vocabulary as a first step may seem a little strange, but there is a good reason for it. In order to trade options, you need to open an account that is specific to options trading. Part of that process involves answering questions about your knowledge of the subject. Learning the vocabulary can help you to qualify for a higher options trading level (check out our article on the subject here).
Once you have your options account set up, it will be tempting to jump right in and make your first trade.
We strongly discourage that until you have made a few "paper trades." These trades can often be put through your brokerage account but aren't real. The purpose is to make sure you are comfortable with the trading platform and understand what you are buying and selling before real money is at risk.
Lastly, it can be easy to get caught up in emotion when you are trading. That's why we recommend creating a strategy to determine when to get into and out of trades before you start trading options. Using logic over emotion will help you reap profits.
To help you get started trading options, we put together a free "how to" guide. In this guide, we cover all of the vocabulary you will need to know, the process for opening an options account, and making your first trade.