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| Trading Basics |
Q: Can anyone trade options?
A: Yes, anyone with a brokerage account that supports option trading can trade options. However, you will have to fill out some paperwork your broker provides to qualify for option trading. If your experience level and/or account capital is too low, you may have trouble getting qualified to trade spreads.
Q: How do I enter a trade?
A:
Meridian, Centium and Optium
Each Meridian, Centium and Optium position requires four simultaneous options trades: (A) 2 buy-to-open trades which form our protection and (B) 2 sell-to-open trades which form the income generation. Depending on your broker, you may be able to enter 2 or all 4 trades as a single spread order. A single spread order executes both or all trades at the same time and is by far the easiest way to trade our credit spread recommendations.
If your brokerage is unable to perform a single spread order, you'll need to 'leg-in' by doing all four trades separately: (A) buy-to-open the two long positions and (B) sell-to-open the two short positions at market or limit prices.
Titanium
Each Titanium position requires purchasing stock and selling a call option against the purchased stock.
Stratium
Each Stratium position requires selling a put option or put options.
Q: What information do I need to trade a credit spread?
A: Access to this site is all you need to open and close the credit spreads.
Q: What's the difference between a limit order and a market order?
A: Whether you prefer a single spread orders or 'legging-in' to execute the trades, you can use limit orders or market orders. Either way, you want fair prices for all positions. Consider which of the following three scenarios is best for you:
(1) With a single spread limit order, you specify the minimum net credit you want, which is the difference between the buy and sell prices. (2) With 'leg-in' limit orders, you ask the broker to buy or sell the four positions at prices you set or better; you specify the buy prices for the long options and the sell prices for the short options. (3) With a single spread market order and 'leg-in' market orders you get fair market value prices and most of the time better execution time.
Our opinion: by using limit orders you may be able to buy cheaper than market prices and sell higher than market prices. The result is limit orders often make your net credits higher as compared to market orders. The downside of the limit order is that it does not guarantee your trade will go through at your asking prices. Market orders, on the other hand, always go through (up to 20 contracts per leg), but at the mercy of market pricing, not your preferred pricing.
Q: Is it complicated to place a credit spread trade?
A: No. Just confirm that your brokerage can place the kind of trades we recommend. Both online and traditional brokerages are suitable for placing credit spread trades.
Q: How much time do I need to commit to each Meridian, Centium and Optium trade?
A: It varies based on your personality and trading style. Our philosophy is to free you from the burden of watching your trade positions every moment. We supply credit spread trades that are low-stress, easy positions, requiring minimal attention. When the stock or index moves in an adverse direction, more advanced users may buy-to-close the short option trade to limit losses and leave the long option trade open to profit in the event of the stock or index continuing in an adverse direction. Advanced trading processes are more time consuming but not necessary to trade our recommendations.
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Stock Option Trading - Option Trading Strategies - Stock Option Trading System
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