Trading Options Profitably - Andrew Baxter

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Profitable Options Trading requires the ability to analyse stocks  reasonably well, so you would think making the transition should be both  straightforward and profitable, if you have had good success picking  stocks!  However, this is not always the case, and so beyond being able  to analyse stocks, what else is needed? 
Compare playing Checkers and Chess  Checkers or Draughts, enables the player to move in one direction, and  is a little like trading shares in the traditional fashion.  That is,  you can only profit from a move up in the share prices (let’s put  shorting stocks to one side for the moment).  However, by learning how to embrace options, you are effectively playing  Chess instead, with strategies that can allow you to profit from a just  about any set of circumstances – moves up in price, moves down in  price, increases in volatility, falls in volatility, no movement at all  in price and so on, and accessing this knowledge is the crux of  profitable options trading.  Profitable Options Trading is a 3 Dimensional strategy  Adding to the move in the stock price, up or down, there are two (in  fact there are more) critically important elements to consider; Time and  Volatility.
Time is one element of trading that carries a guarantee!  That is that time always passes by! This can be an incredibly powerful  ally for the right options strategy, or your worst nightmare, if you are  in the wrong options strategy – the crux of this being whether you are a  buyer or seller of options.  As a seller of options, you want time to  pass, you want the option to expire, you want to keep the premium.   However, as a buyer, the opposite is the case, you don’t want time to  pass – try stopping it!  One thing is even more important than time  And that is volatility.

Volatility is a massively significant component  in options pricing and therefore, your income or risk, when trading  options.  When selling options, paying attention to this can be the  difference between a good and a great trade.  Personally and  professionally, this has really be a lucrative one for me, with trades  in stocks such as Tesla and Fortescue Metals being two very good recent  examples, of timing a sale of options in high and falling volatility, to  really make over and above returns on those trades. Bare in mind of  course, trading and investing does involve risk, hence why it is  critically important to be educated on how to do this.

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