Comments on: How To Start Trading

By: wah

wah — Tue, 15 Mar 2011 01:21:56 +0000

Hi Anna

My name is Wah ,been following you on your great website for good few month now have also try trading demo account by MBT cos they say they are ECN every thing is ok so far so good and want to start to trade a real account but when I try to open a real account MBT said they dont take client from UK can you help
I have try looking on net and reading reviews to find a broker but more I read more confuse I become every broker seem to have lots of bad custumers calling them a scam.

Thank you

Wah

By: anna

anna — Mon, 28 Feb 2011 14:57:28 +0000

Hi Skyler – many thanks for your detailed comments regarding covered call writing and I will do my best to answer your questions. First of all, no you are doing nothing wrong in terms of the order of placing an order – basically buy the stock, set the stop loss and sell the call. The position for the stop loss is, I’m afraid a personal choice, and naturally will depend on your risk tolerance and also where the most recent level of possible support is with regard to the most recent retracement, but always below the last pullback. The premium does of course off set some of your loss, should the stock fall in value and fail to reach the strike price, but should your stop loss be hit, then you will be trading a naked call option which is extremely risky and not something I recommend so you need to keep a strict eye on your positions at all times. Should this happen then you need to close out your call, unless it is very close to expiry. Moving on – I don’t understand your comment regarding call premium when you say calls are almost never positive? As the option seller you receive the premium, and as a covered call writer you want the call to expire worthless – otherwise your stock will be called away, which is fine as you then make a profit from both the increase in stock price and the premium from the covered call. Options are a wasting asset and the closer that they reach to expiry then the less value they have – but to you as the option seller – this is what you want as the option holder has no chance of reaching the strike price and beyond. As such you can then sell another option once the first has expired. The other way of approaching this is to buy a put option which is an alternative to the stop loss, but this is then a different strategy entirely. Finally – you say you cannot figure out the premium you receive when buying the call – when you buy a call you do not receive a premium at all – you are the buyer and paying the seller of the option – it is the seller who gets the premium not the buyer. As the buyer you are simply paying a premium for the option to buy the shares in the future at the agreed strike price. If this strike price is not achieved then all you have lost is the premium you paid and no more. This is not a covered call, but simply a speculative trade using an option. – hope the above helps and good luck with your trading and investing – Anna

By: Skyler

Skyler — Wed, 23 Feb 2011 22:09:14 +0000

Hi Anna,

My name is Skyler and I’m very interested in covered calls. I just have a few questions on the matter. First of all, the order of doing things is this: buy the underlying stock, set the stop loss, then sell the call, correct?

I was wondering if you know the easiest way to figure out where to set the stop loss in order to at least break even. I just thought I’d ask because I know you have to take into consideration the premium and the commission.

I started a demo on the website you posted, interactivebrokers.com, and I have been buying 1000 shares of one company then selling 10 calls. Am I doing this right? I thought I would do this and figure it out before starting into getting in the habit of stop losses since it’s just a demo. Ahh! I have so many questions for you haha. I have followed your idea of looking at the IV and just looking for the nearest + price to buy the call on. I’ve also checked the charts to see what kind of trend the stock is in to try and get a better idea of where it will go.

One thing I can’t seem to figure out is how to find out the premium I would receive when buying the call.

So here’s an example of what I’ve been doing. Let’s say I buy 1000 shares of XYZ at $21.33. Then I would go and sell 10 February 25th calls that are set at $22 and they’re $.40. The underlying stock most always goes up and I get a profit and it’ll go up and down but it almost always stays positive. The calls, however, are almost never positive. My position with them is -10 which is obvious because I’m selling 10 of them but then I’ll always be in the hole in the profit/loss column. Am I doing something wrong?

I NEED YOUR HELP! haha

Thanks a ton

-Skyler

By: Fong Chee Keong

Fong Chee Keong — Thu, 24 Dec 2009 00:46:25 +0000

Hi Anna

I stumbled onto your site by … …

Start to see results and hopefully can pay it foward within the next year.

Happy Holidays.

Regards

Fong CK

By: ann

ann — Mon, 14 Sep 2009 12:15:33 +0000

you are a daisy amongst weeds

thank you for your reply – i think i will stick to initial path for a while yet since travelled so far
down this route

thanks again
ann

By: anna

anna — Sun, 13 Sep 2009 13:37:01 +0000

Hi Ann – my personal view would be to start with the stock market rather than futures given their volatility and the issue of leverage. However, I do appreciate that you may not have a choice. If this is the case then my advice would be to stick with a demo account for as long as it takes you to feel confident. Whatever you decide the most important elements of your trading strategy will be your risk and money management rules which never sound as sexy as “your profits”!! I am currently considering a specialist site which deals with risk and how to remove it effectively. If it’s ok with you will send you details nearer the time. Kind regards. Anna

By: ann

ann — Sun, 13 Sep 2009 09:03:45 +0000

hi anna,

i am currently learning to trade the futures market and finding it difficult i guess because of the learning curve required – my question is – is this the best place to start or should i be trading stocks and shares instead??

many thanks for your comments

ann

By: John

John — Thu, 02 Jul 2009 15:40:21 +0000

Hi Anna,
love your sites, do u have a course on trading world currancy options, i have subcribed to a newsletter on it but they offer no help in finding a broker, so in Au i lookaround and only a few US firms do it here but our money is kept in US banks which i dont want to do, havefinnalyafter 3 monthsfound a broker a large UK firm who has heard of WCO, and althgough you are either buying calls or puts no margin calls one has to open with A$10,000 and ones money ois kept inAU banks in a segrgated account ,i like.

But i ring the trading floor and the guy there does not know about it told him is first trade and need a little help on it gave the symbolandhenearly puts it through onanother type of trade until i called stop. and finally gotit through but is Sept euro -US$ options call at 144 and i had looked at the screen before i called was showing buy at 2. and yet he has found a seller at 2.46 i lookat onc3e after trade is done and is till at 2.20 dont figure that one out, the bissgest shock is the charge per contract to place is $35 i bought 15 trades, so its 15x $35 butto my shock later is in US$ eventhough broker is tradinginAustralia means that with extra on GST i will have to make a profitof nearly A$1500 to pay brokers fee before i can make A$1500

I still am trying to undrestand how to work out the profits and how it all works, have asked as well does it get cheaper yes it does but no reply as to howmany trades must be activated before it becomes cheaper

if you have imformation to understand about WCO and how to work out profits would be appreciated.

John

any feed backabout how thechoice of Sept euros/US$ will pan out i bought at 2.46 and hope like hell i have made the right choice on the first trade, as it is just sitting there at the present

By: anna

anna — Tue, 10 Mar 2009 15:52:02 +0000

Hi Gobind
Many thanks for your comment, and my suggestion would be to start with some good basic books on trading and investing – you can never read or learn too much. I now update many of my currency sites on a daily basis so hopefully this will help, and I also have a spread betting site which explains all the basics and how to get started. With regard to learning how to trade in the stock markets I would recommend you learn using a virtual game – there is an excellent one on my stock market games site, and you can sign up there for free – plus win cash prizes which i a bonus! – this provides a real environment in which to learn with live charts and prices – they have some excellent learning resources as well. I do not currently run any courses, and my own suggestion would be to read as much as possible and to learn by practicising – when you do start, begin with VERY small amounts. I am not aware of any brokerage houses recruiting at the moment and suspect that this may be a very difficult option at present. All best wishes and I hope the above helps – anna

By: gobind sangar

gobind sangar — Sun, 08 Mar 2009 20:59:07 +0000

Hi anna my name is gobind and i am interested in learning how to trade stocks/shares and i am also interested in learning how to spread bet epecially currencies and indices seem the way forward for me i am a complete beginner/novice do you run courses at all or one to one mentoring sessions on learning how to trade and spreadbetting and if so how much do you charge for your courses? and finally do you know of any brokers or brokerage houses that would be willing to take on trainee traders/brokers with no industry experience i am 36 years of age please advise
kind regards

gobind sangar