About trading and following a Stock Pic Site

Today I was in a conversation online with someone that reached out to me and we talked about option trading. I thought that it was pretty important so I decided to share my answer with you.

My site is for people that have had some experience with buying options. I am unsure of what your experience level is, but when I was learning in the early 90's I once had a guy tell me options is like having a fist full of cash then while still holding on to the cash, stick your fist and arm out the car window while doing 60 and then opening your fist. Most options expire worthless due to people holding on to them till expiration hoping for a miracle at the last minute. 

Options are simply a harmonic of stocks but are several orders more tricky, because you are fighting a time element, that of its expiration date. What I would suggest is (again, I'm not sure what level you are at) become familiar with online trading by opening an account on Optionsxpress or another online broker like scotttrade, etc and become familiar with the workings of the site. How to enter and execute a trade, how to deal with the Market Maker and the difference between a market order and a limit order, etc. Once you have been trading for a few months with just stocks and are successful at it, I would then go to the next level and start learning about trading options: The option chains, the strike prices, what it means when you say erosion, (the time factor and how to play it) and how options prices react with its corresponding stock in relation to A) its strike price and B) its expiration date.
If however you are up to speed on online trading and options, then cool.
I just dont want you to see one of my trades, then go online and have a market maker mess with you right when you place a market order, or have a problem understanding the time element due to lack of experience...it could cause losses.
At the beginning if this is the case, I would just follow my stock trades because my analysis is the same of the underlying stock.

I was thinking about this email afterwards for a few hours and then I decided to share it with you guys. Its not my intention to lead people in to the world of option trading that have not had any experience with option trading. If you have never had an online account before, if you've never placed a buy or sell order for a stock online, I fear that you do not have enough experience to take the option information that I supply then turn around and purchase that option online through your trading account.

Its not my goal with this site to make money. Its to teach. So over the course of the next few weeks, I'm going to get everyone up to speed on how to use an online trading account, and I would seriously suggest that before you try options, that you try trading stocks, entering and exiting positions. After we do options for a while, I will then introduce you to options trading and all the ins and outs as I have described in the above email.

And another thing. I am not perfect, but damn close. (wink) You will need to follow my pics for a while before you even consider jumping in and following me. This goes for any 'stock pic' site that you will visit. Type in 'stock pic' site on Google and you will get pages and pages of returns of people, mostly sitting in their basements, making stock pics. Some have the money to make their stock sites look slick like they are running the site from an office tower, and some have more amateurish looking sites. But one thing Id like to tell you is that you have to test drive the car before you buy the car. If they have a 30 day free trial, do that before you start paying the service. Even better if they let you shadow them for a while so that you get the feel for the stock picker, what kind of pics or angle he or she is using and most importantly, what kind of performance record they have. "Past performance isn't necessarily indicative of future results" actually is untrue in this case. A stock pickers past performance will show you if they know what they are talking about....and if they do know what they are talking about, you are probably going to make money.

So thats it for tonight, more tomorrow. 

Mark