How I Earned My First $100 Via Options Trading [DETAILED EXAMPLES FOR COMPLETE BEGINNERS]

Step one: Choose a company that you love, use yourself, and believe will be successful in the next 5-7 years. This company should be in the S&P 500, which is a list of the top 500 companies in the US, like Apple, Microsoft, and Amazon. If you're not sure if a company is in the S&P 500, you can search online. Make sure you feel comfortable owning this stock for the long term.

Step two: Decide if you want to trust your gut or do more research. Some people just go with their gut feeling, while others read annual reports, test products, or interview employees. Find what works best for you and make sure you have conviction and confidence in the companies you're trading options on. If you can't decide, it's okay to take a break and think about it more. Just keep in mind that Netflix is also a company you can trade options on, but it may not be the best choice.

Step 3. Check past trends. Search for your chosen company and look at the stock price over the past 3-5 and 10-year periods. The stock should generally have an upward trend. If the trend is downward, choose a different company.

Step 4. Choose a broker. Some options include MooMoo, Tiger Brokers, and Interactive Brokers. Consider signing up with a broker that offers promotions, like free stocks. All brokers in Singapore are regulated by the MAS, but it's still a good idea to read the fine print to understand how much of your money is insured. Transfer the amount needed to buy 100 shares of your chosen company into your brokerage account. If you don't have enough money, you can practice with a paper account using fake money.

Note: There are other options trading strategies, like selling spreads, if you don't have enough cash. A video explaining credit spreads will be linked in the description.

Step 5: Understanding Options Trading. Options trading is like selling insurance. You sell put options, promising to buy a certain number of shares at a certain price within a certain time frame. The price of the option is determined by supply and demand in the marketplace. Options trading involves hundreds of thousands of transactions happening every second.

Step 6. Choose a strike price. The strike price is the price at which you agree to buy the stock. For simplicity, choose a strike price that is 20% below the current price of the stock. You can also consider the implied volatility (IV) of the stock, which is a measure of how much the stock price is expected to fluctuate. It's generally better to sell put options on stocks with an IV above 35% because you'll earn more money.

Step 7. Sell your "insurance" on the brokerage platform. Login to your broker and go to the options chain. Choose a time duration of 30-45 days and find the region below the current price of the stock (called "in the money" for put options). The closer you sell your put options to the current stock price, the more you'll get paid. Check the "delta" column, which is a proxy for the estimated probability that the option will expire in the money. When you're ready to sell, click "trade" and "sell order." Click "preview" to see the exact amount you'll get in USD for the option contract. Once you confirm the sale, you'll have earned your first $100 (the amount may vary depending on the volatility of the stock). Write down the details of the trade on an excel sheet.

Step 8. Wait. If the price of the stock remains above your strike price by the expiration date, you'll keep the cash and premiums received from selling the put option. If the price drops below the strike price, the person who bought your put option can exercise the contract and sell you the stock at the agreed-upon price. This is called getting "assigned" from put options. If you don't want to buy the stock, you can try "rolling" your options by buying back your current put option and selling a new one with a later expiration date. If you don't want to spend the full amount on the stock, the price must remain above your strike price. To avoid getting assigned, you'll need to monitor the stock price daily.

Step 9. Do it again. If the price of the stock remains above the strike price, you've earned money from selling the put options. Repeat this process until you've earned $100. Try this using fake money first and then use real money when you're comfortable. Selling put options is just the basic concept of options trading.

This video is for entertainment purposes only and does not serve as any investment advice.

[eduardoolmedo]

Loved the video!, Not too many views but you were my first result in google, honest and straight to the point. Thanks!!

[jakubciekot]

JJ why did you stop making videos? We need more! 😋 Great job.

[HSVfreedom]

Loved this video! You explain it so that I am able to follow. You earned a subscriber. Want to hear more from you. I had not known I need to own 100 stock to use options.... basic information, but no other video made this clear to me. Also appreciate you helping with Interactive Brokers. It is not very intuitive for a new user. You showing where to click and what to choose is invaluable. Helps so much!

[gusgus]

great to listening your clear and quick explanations👍

[sri_jella]

Great explanation JJ. What margin do we need to have in a/c with IBKR to sell apple PUT AT 120 strike. Also if I buy another put to hedge at 110. Do I get margin benefit?

Can you cover about margins and hedges in your next video please?

[myeo]

Thks jj great content, can u teach more on how ibkr can monitor buying power for each ticker? Just switched over from td and super lost