Learning About Options (Part One)

I have recently received several requests from readers who are interested in learning about options from scratch and are looking for suggestions on how to proceed.

First, I should preface my answer by saying that even if you never intend to trade options, it will probably be worth your while to take some time to understand how they work. At the very least, it is helpful to appreciate what is in the black box that generates various options indicators, such as the VIX and the put to call ratios.

Second, I intend on making this the first installment in a series of posts that cover the subject of learning about options. Today I will talk about two excellent general resources on the web; in later posts I will examine educational resources offered by the exchanges and several options brokers, recommend some books, discuss additional web sites and conclude with an overview of some of my favorite options blogs.

The subject of options is broad and deep. Fortunately, there are some excellent free resources on the web that allow someone who is interested in options to learn at their own pace and in small chunks of ideas and information.

Two excellent all-purpose resources for options beginners are The Options Guide and The Options Industry Council ((OIC)). I mention these two sites first, because their sole intent is to inform and educate, unlike some commercial sites that provide some free information and then try to sell you something with a subtle or sometimes not-too-subtle approach.

The Options Guide has a variety of short articles in their Options Basics section, as well as a handy Options Strategies reference, where you can search for specific types of options strategies that meet your needs, or click on an excellent visual menu of profit and loss graphs to get detailed information about a wide variety of strategies. There are even separate sections for index options and VIX options.

The Options Industry Council takes a comprehensive approach to education. While The Options Guide is a great starter kit and reference tool, I consider the OIC’s web site to be the gold standard. It is a great place to browse and get lost. If you want articles, DVDs, books, brochures, etc. on just about any options topic you are interested in, there is a good chance you will find it in the OIC’s online vault. The OIC has embraced a multimedia approach and as a result, offers online classes, as well as seminars and webcasts. You can see what material is available as a video webcast and also download a wide variety of podcasts.

The OIC also has a broad range of tools that includes a several options calculators, an options strategy screener and a position simulator. If that is not enough, you can even do some virtual trading through the OIC.

Considering that everything offered by The Options Guide and just about everything (books are an exception) offered by the Options Industry Council is free, investors who are interested in learning about options should put these two web sites at the top of their list when embarking on a self-study approach to learning about options.

Comments

[dc1:]

Thanks Bill, for another useful post. Looking forward to additional articles.

Mar 27 12:38 PM

[Fred Ruffy:]

In the past, the "investment education" biz seemed to be dominated by private companies selling expensive courses and seminars. Brokers didn't bother educating investors because, well, they want investors to believe that they really need their broker's expert advice! Many investors still want and need advice.

Larry McMillan's "Options as a Strategic Investment" became sort of a "bible" for options traders, but beyond that, there wasn't a lot of information on options trading available to individual investors.

The internet changed everything. The web sites you mention are examples of free education and many online brokers have also stepped up efforts to educate investors--especially when it comes to trading options. Many offer free live courses and webinars. Some offer coaches and mentors. Others offer the ability to paper trade online with live quotes.

There are a plethora of tools out there, but there is also a lot of misinformation and a large number of dubious companies pitching options education today.

Great idea for a series of articles Bill and great suggestions so far. I look forward to reading the rest.

Mar 27 05:24 PM