Trading options is a fairly straightforward process once you understand the underlying mechanics. Here are the main steps to get started:
- Open a brokerage account: Start by choosing and opening a brokerage account if you don’t already have one. Pay close attention to fees and pricing if you plan on active options trading. Here’s a look at our favorite brokerages if you don’t have one already.
- Fund your account: You’ll need cash in your account to buy the option. So fund your account with sufficient funds for your trading strategy.
- Request options privileges: Once your account is up and running, you can request options trading privileges. As shown above, some brokerages offer incremental trading abilities as your experience improves.
- Enter your first options trade: Now it’s time to enter a trade! See an example of how that works below.
- Exercise your option if it’s in the money: Keep close tabs on your options account, as options can be quite volatile. Be prepared to make an informed decision, or to sell early if it seems prudent, as your expiry date approaches.