Options can be a wonderful means of complementing other types of investments. It allows a trader to have trades that produce leverage and may be less correlated to the other parts of their portfolio. However, it’s the leverage that can make it difficult to make your way into trading options without some sort of education. When choosing an options trading educational provider, one should consider 1) the qualifications of the individuals delivering the education, 2) whether the education is connected to a brokerage firm, and 3) the cost.
When evaluating whether to purchase a program or not it is important that you attempt to find out what type of background the group has that is selling the educational product. This may seem easier than it really is. Every provider has a story to tell and may often tout their performance as being their primary qualifications. Even if someone presents themselves as a former floor trader it doesn’t mean that they have the skill to trade options as a retail investor. Do some searching for comments about the provider in regards to their abilities to instruct and whether they were able to reasonably apply the strategies being taught. Don’t focus as much on the comments about returns. The issue with focusing on whether something “works” or not is that it takes your eye off the ball. You want to learn how to trade options, and ultimately it is YOU that determines whether something works or not. You don’ know how well those individuals executed a particular strategy, whether their position sizes were appropriate, etc.
A trend over the last many years is to tie option and other related education to a broker. This can be a more cost effective solution if you have more considerable assets. Many firms will give you credits toward their educational products for transferred assets. Going this route has its advantages since you’re more likely to get what you pay for. If you contract with a third party provider they won’t generally have as strong of backing and tend to go out of business more regularly. While the product offering, cost and quality of their offering may generally be higher than your typical third party provider there are some downsides. The most significant is that brokers will have more stringent compliance. While having some sort of compliance policy is important, at that level it dictates the types of strategies discussed, what types of rules that can be implemented, etc.
For most investor education consumers, cost is the number one issue. You have to remember that it is a costly business to provide any substantive level of educational service. You’ll find many programs priced around $2000-$3000, and it is not by mistake. That tends to be a price level that people feel that they’re getting substance, but yet is a reasonable amount to part with. If you’re paying that kind of money for educational materials and possibly a newsletter for a period of time you’re probably being over-charged. Realize that most of these providers aren’t doing anything different, but if the cost is low enough it may be worth a look. If you’re paying for someone to be a guru for you as opposed to providing option education, just subscribe to their newsletter and see how it works. However, if you’re serious about learning the markets, the quality of the educational offering for the cost is of utmost importance. Lastly, make sure you’re not going into debt to purchase an educational program, and at least have sufficient funds to invest beforehand. If you pay $5000 for education and you’re starting with $1000 in a margin account, you probably weren’t in a financial position to purchase that level of education. Don’t get caught in the trap of needing to make your money back quickly, no matter the quality of education you’re likely going to make mistakes and lose.
Hopefully the preceding comments help you on your journey for a solid options trading education. Remember, in the end, it takes discipline and work on your part, but finding a helping hand can be beneficial to getting where you need to go.