Stockhaven's Classroom 5/10/12 | Stock Haven | Stock Chat Room | Penny Stocks | Options |Stock Haven | Stock Chat Room | Penny Stocks | Options |

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Stockhaven’s Classroom 5/10/12

Topics include: Strategies for options traders who cannot pattern day trade, explaining a “straddle” and a “strangle”… Tickers reviewed: IMSC, LUXR, AAPL, IZEA, RARS, ENTB, ORYN, ADY

Below is a text version of the submitted questions (italics represent Stockhaven’s comments):

1.) I’ve been paper trading Options all week long and watching what everyone’s saying in the options chat room carefully.  I’ve actually made a lot of good fake money paper trading options but of course, I can enter and exit trades without fear of pdt rule because it’s all just pretend at this point.  My question is… do you have any advice for new options traders who are hindered by the pdt rule?  I notice that all the “Big Room” traders are in and out of options pretty regularly.  Are there situations where you would hold options overnight or longer?

paying as little in premium as possible is going to help minimize your risk 

you want to choose an option who’s expiration date isn’t so close, that way you have more time for the trade to play itself out 

2.) What is a straddle and strangle order on options?

a straddle means you buy (or you short sell short) calls and puts on the same strike on the same stock/etf/index

a strangle means you buy (or you can sell them short) calls and puts on different strikes on the same stock/etf/index

how much premium am i paying? as a result, how big of a move do i need the stock to make? 

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