Options trading vs. Stock trading - which provides least risk?
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most online brokers have some minimums. they vary. in order to day trade, as i recall you need $25,000 minimum. there is a formula that they used to determine if you are a "pattern day trader". you must follow the rules and have the cash in the account to pay for the trades you make. you get a few strikes and then they will prohibit you from trading your account if you don't have funds available. do a search on the site of the broker you choose for day trading rules.
Learn before you burn yourself out. Most (and i really mean most) people lose money day trading. You need a discipline that is hard to master. You need to know how and when to take a loss as this is what saves you to trade again in search of the winners. Stop loss orders are very important. And you need to realize that you are trading against professionals who get better executions of orders, have better information and faster access to it. You are also trading against computer programs.
Options are for the most part a highly speculative venture unless you are writing covered calls to try and boost your return on your long positions.
read the educational stuff at bobbrinker.com
Stock trading has the least risk but options trading has the most rewards. Options involve leverage and timing mure than stock trading. You can keep and hold a stock for an indefinite period of time. Your option will expire on a particular date. You can leverage your stock trading experience by buying on margin or selling short. Both can be risky strategyies.
1) Visit etrade.com for more detailed information
2) Yes, it is very risky.
3) In stock trading you only lose what you want to lose and not one penny more. For example you can define a maximun limit of 20% and when your stock is down by 20% the computer software sells your stock and you only end that amount. In future trading you can lose everything. This does not considers margin accounts where you are trading on credit.
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