Lessons

Answering some questions about Lesson 6

Well I am happy to report that people are reading reading the lessons, this really makes me happy. Many of you know one of the things that sets me off the most (or that I find the most demoralizing) is when someone asks me a question that I just answered. Its just a character trait of mine that has been with me for years and can not change. In short, the way i see it is “you are asking me a question and in effect asking me to give up my time to help you, yet you will not give your own time to read my responses properly”. So when I see questions directly about what I have written, it makes me happy as I know that people are taking the time to read, think and ask properly. As a result, I will do my best to give these questions proper answers.

I got 8 new messages asking me specifically about lesson 6. The funny thing is that 6 of the questions were all the same. They basically wanted to know what the advantages of options could be over the conventional way of trading that we do on a daily basis.

First to address the 6 questions:
As stated in lesson 6, an option is a purchase of the right to execute a trade at a given point in the future. It can either be put (sell) or call (buy). The idea is that most online options brokers do not offer options in the traditional way (like banks or funds do) and they simply let you pick a time frame and a direction and as long as your are right, you receive the payoff (whether you get the direction right by 1 pip or 100 pips etc). For example, do you think the EURUSD will go up or down over the next minute,hour,week,month etc. As you can imagine, for some people this is easier because:

1.) They find it easier to asses a trend rather than absolute amounts, especially over longer periods.
2.) They find it convenient that they can not be taken out by sudden spikes.
3.) They know their risk and exact payout before entering a transaction which for many people is comforting.

What I don’t really approve of is the gambling approach some people take with options. I.e. Saying in 1 minute this will be higher or lower. Since this is effectively gambling (for obvious reasons)

The next question was about how to use options to hedge or protect trades:
I will cover this in a future lesson, since it requires more understanding to do this effectively and minimize losses. Also it does not cover the sort of options that most online brokers offer and so is not relevant to 99% of my readers at this time.

The final question was why haven’t I recommended a platform for the community:
In all honesty, I have looked and I am still looking (when I have time). But so far I have not found one that I think is suitable. In order for me to recommend something, it needs to have very strict criteria (as many of you know) and I can not and will not recommend a platform to the community that I do not have complete confidence in. Sorry but you will have to wait a while longer in this respect.

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