Options can be incredibly complex or fairly straightforward.
They can be risky, using large amounts of leverage, or they can be used to hedge investments and therefore actually reduce risk.
Watch The Video Here (Or Read On)
For the beginner, options can be intimidating, especially when one starts to dig deep into all the types of complicated strategies that are available.
Plenty of these strategies can be seen over on the Tastytrade website. If you click on ‘learn’ and look down the list of options strategies you can see there are lots of exotic sounding names such as Iron Condor, Jade Lizard, Sunny Side Up etc.
Some of these strategies are sophisticated and meant for experienced traders only, but simple strategies such as the covered call are much more accessible to beginners.
Overall, the Tastytrade site is a vast resource of information for options traders, good for beginners as well as more advanced traders.
The main problem though is that it’s nearly all video content recorded directly from the Tastytrade TV show and it can be quite time-consuming to get to the good stuff. In my eyes, the Tastytrade TV show is probably best for having on in the background rather than something you want to sit down and focus on.
Dough, on the other hand, has lots of very well made educational videos and it doubles up as a trading platform too.
If you sign up and log in to Dough, you get to the dashboard where you can see recent option trades, watch Tastytrade TV, and follow other options traders.
If you click into DoughJO, you get to a whole series of courses designed to get you up to speed with options. These are all well-made tutorials with interactive features and quizzes.
And once you’ve completed the training you receive a certificate which can actually help you get your first brokerage account opened.
In terms of the brokerage account and the actual platform, Dough links up with TD Ameritrade and the trading platform is really useful, one of the best I’ve seen for options trading.
Clicking on Trade brings up the platform. You can then bring up a stock and place your puts and calls in the market.
The best part, though, is that you can load up ready-made option strategies so that you don’t have to spend too much effort working them out.
So for this example, I will click on strategies and load up a long call vertical.
Long Call Vertical
With a long call vertical, you’re buying a call at strike price A and selling a call at strike price B.
By doing so, you’re making a bullish bet that the stock will end up higher than your strike price on the date of expiration.
Because you’re both buying and selling a call, you limit both your downside and upside on the trade. So this is useful when you think a stock will go up by a relatively small amount over a short time horizon.
And for the record, long verticals are probably my favourite type of option when betting on the stock market…
Using the dough platform it’s easy to see how this works. By clicking on the green dollar sign you can see the maximum profit you could make if the stock ends up above the strike price at expiration.
And if you click on the red dollar sign you can see the maximum loss if the stock finishes below the strike price. You can also move the puts and calls to alter the strategy as you see fit. The date of expiration is shown right above the curve. In this example, it’s 16 days (shown as 16d).
You can then increase the size of the bet and alter the expiration date using the options in the top panel.
Once you’ve found a bet you’re happy with, you can then send that order straight to your account with TD Ameritrade.
Overall, this is a really useful and clever way to trade options. When you compare it to other platforms such as the free simulator from the CBOE, then Dough is a much easier and intuitive alternative.
– For more trading tutorials, make sure to check out my Udemy course Hacking Financial Markets: 18 Tools For Trading & Investing.
Thank You For Reading
Joe Marwood is an independent trader and the founder of Decoding Markets. He worked as a professional futures trader and has a passion for investing and building mechanical trading strategies. If you are interested in more quantitative trading strategies, investing ideas and tutorials make sure to check out our program Marwood Research.
This post expresses the opinions of the writer and is for information, entertainment purposes only. Joe Marwood is not a registered financial advisor or certified analyst. The reader agrees to assume all risk resulting from the application of any of the information provided. Past performance is not a reliable indicator of future returns and financial trading is full of risk. Please read the Full disclaimer.