Frequently Asked Questions
Over the years of running OnlineOption.com we’ve received 1000’s of questions about options trading, long-term investing, gold, silver, cryptocurrency like Bitcoin, personal finance, and just about everything else you can imagine relating to investing.
However, there has been a theme to a lot of the questions.
Below you’ll find the most frequently asked questions and our answers to help you out.
What is Your Trading Philosophy?
I believe that the first step after deciding that you want to be financially independent is to divide your current assets into long and short term categories.
80-90% of your money should be in the long term group.
For most people this will be things like index funds.
Next is to set up a plan to regularly and consistently add to this area.
I look for 10%+ out of long term investments.
After that has been accomplished, the 10-20% that remains can be considered.
Here I look for the big returns.
I prefer to position trade options on stocks.
Much of the site is designed to support option traders with trading ideas and ongoing education.
To be successful one must have a way to find great stocks, know what option to buy, when to buy it and when to sell.
Finally a clear system of money and risk management must be in place.
How Often Do You Trade?
The average position is open 2-6 weeks yet this can vary on the current market environments to be shorter or longer.
I prefer to make a few very good trades rather than a lot of O.K. trades.
This not only cuts down on commissions (before commission free trades) but requires far less time than frequent day or swing trading.
What are the Benefits of Option Trading?
In a word…big profit.
Options provide an enormous leveraging advantage over stocks with the ability to clearly define risk limits.
Using options you can participate in the growth of the very best companies without needing huge amounts of money to invest.
One thousand shares of a $100 per share company would cost $100,000.
But you can achieve control of 1,000 shares of the same company using options for perhaps $5,000.
When the stock price then goes up, the option price will also rise but in an accelerated or magnified way.
This is how triple digit returns are achieved using options.
What More Will I Get Out of Advanced Membership?
Advanced Membership entitles you to receive alerts and updates directly to your E-mail address when they are issued!
For the minimal cost of upgrading to Advanced Membership (we no longer offer the basic membership) you can benefit from time-sensitive market alerts without having to wait for posting onto the site.
What Broker Should I Use?
Choose a broker that offers option trading, cash secured puts and calls.
You will want to find a broker that can provide quick and accurate trade executions.
Within the Member Area, you will find complete listings of brokers with direct links to many of the most popular brokerage sites.
Can You Give Me a Real Life Scenario from Your Own Trading?
An excellent real life example of the power of leveraging the stock market through the use of options on stocks was made clear to me to day.
About a year ago I bought some LEAPS on Cisco Systems.
LEAPS are simple options with a longer time frame to expiration, up to two years.
At the time I brought two contracts.
Since that time Cisco has made two 2 for splits.
My previous two contracts have now grown to eight contracts due to these splits.
In conjunction with this, the underlying Cisco stock has appreciated nicely.
My options are now well “In-The-Money”.
That means that their strike price is below the current price of the underlying stock.
This adds value to such an option.
Currently, when Cisco shares rise $1, my option premium also increases by $1.
Think about what this means.
It is staggering.
Every time Cisco goes up by $1, I make $800!
Because every single contract controls 100 shares of the underlying stock.
Today Cisco stock went up $5 1/2.
So I made $4,400 today alone on this one position.
Yesterday Cisco went up about $6, so I made $4,800 yesterday.
Consider then, the awesome power of prudent use of options on stocks.
And that my friend is what I am here to teach you.
New Member Asks What to Do With Profits?
I am a very new member.
The question occurred to me as to whether one should remit 80% of each profit made (and I’m sure there’ll be many) to one’s other longer-term investment portfolio, or what?
If you do not need the profits made in trading for day to day living, then I suggest that you put 1/2 of the profits into your long term account.
Then, just leave the remaining 1/2 of the profits in your trading account.
This way you will be doing three very important things.
1. Building the amount in your trading account for greater future trading power.
2. Preserving money for taxes.
3. Supercharging the increase of principle into your long term account.
What is the Difference Between the Windows to Wealth Book & the Online Option Trader Manual?
The Windows to Wealth book and video series volume 1 and volume 2 is primarily involved with technical analysis of charts, and its practical application.
The Online Option Trader Manual is more of an instruction on the treatment of trading, into which technical analysis would fit.
The Windows to Wealth book is definitely more detailed but is specifically aimed at reading charts.
Do You Give Specific Entry & Exit Recommendations?
The primary focus of the site is on learning to trade rather than providing specific entry and exits.
We on occasion send out trades to our advanced members that we are doing but more frequently alerts members to charts that are showing impending potential trades.
Members of the site interact with us during our weekly Online Option Help Sessions.
So to be clear we are not an advisory service and do not get involved in specific trade recommendations.
Do You Have a Record of Member Results?
We do not have a mechanism in place to capture all the trades that students make.
To make such % return figures even close to relevant we’d need to break down the numbers according to experience level, adherence to the stock screening criteria, following of entrance technicals, market trends, proper exit timing, and so on.
Even if all this were done we would then need to have ‘faith’ that a true cross-section of members reported their trades regularly.
In addition, we would have to have a way to check that the information they entered was accurate.
All this would be a full-time endeavor for a staff of people.
Therefore there is no record of trades made available to members of the site and as I’m sure you know everyone’s results will vary.
What is the Potential for Earning Money?
Results in trading vary wildly.
We suggest that becoming a full-time trader is a process rather than a single leap.
After finding success in paper trading, gradually transition to real money trading.
Early trades should be small.
With profits, your trading account can then be grown.
One challenge with going ‘pro’ is that the emotional side of trading becomes more pronounced.
This is one reason that you should keep the ‘day job’ during the process until the time is really right.
How About Trading Indices?
To trade the indices you can look to the following ticker symbols:
[+] NASDAQ = QQQQ
[+] Dow Jones = DIA
[+] S&P 500 = SPY
Will Your System Work with Commodity Futures Options?
The system of chart analysis that we use to trade stocks and options is directly applicable to commodities.
Still Need Help?
If you’re question wasn’t answered above we recommend that you contact us here.