Sequential Learning Of Options

Many students of trading, upon becoming overwhelmed with the plethora of information, ask the question, “What should I learn first?”  or “What is the proper sequence of what to learn in order to become a successful trader?”

It is my contention that, YES, there IS a proper sequence of learning how to trade, especially in the trading of options over straight stock.

First and foremost on the list are the rules of portfolio management.  This might be followed by the basic definitions of options and the dynamics of how options really work.  This should be followed by a host of exercises to ensure the student has a solid basis for options trading.  This might include technical analysis, risk graphs, exercise/assignment issues and the effects of market conditions on the CHARACTERISTICS of options.

Finally, a venture in paper trading of some of the basic options would lead to studies of greeks, options math, monitoring procedures, risk identification and management and an introduction to spread trading.

The basic principle is that options trading is complex and takes much time and practice to achieve mastery.  But EACH COMPONENT is very dependent on the thorough understanding of the one before it.  It is essential that the trader have a full understanding of the BASICS, else the one will soon find himself or herself in grave financial danger and exploitation by more experienced traders.

My suggestion: Find a good mentor that can help you to personalize your approach and plan out a specific study sequence.

Good trading!