Don't Get Fooled By Traded Options - Free Software
April 2005
Make no bones about it, making money (over time) with Traded Options is a hard endeavour. And unless you're analysing your trading strategies with the use of a computer the odds of making money reduce even further. But help is available for free with some excellent option analysis software.
Traded option theory is like an iceberg, there is far more to it lurking below the surface. And this is where most people new to options fall down. Perhaps they read an introductory 750 word article in the weekend's FT or a spread in the Investors Chronicle, get a jist of how they work and then start to play around with them in real-time trading. With this kind of training those people are doomed to failure because the information in these types of short articles can only scratch the surface.
For example, option volatility is rarely mentioned or explained in the articles or beginner books. But this is crazy because volatility is the most dominant factor in all of options. The crux of the matter is this, if you want to have a chance at making money in options you've got to be prepared to do some serious research. Without training/research it's as if you want to beat the competition in the London Marathon without training, the same competition that HAS been training hard for many months. Bottom line, market participants in the option markets are some of the brightest and most gifted traders in the world.
Free Options Software
One of the ways to fully understand options is to take them apart with a computer program. Computers and options go together like fish and chips and it's hard to comprehend how anyone can make money with a program to help them. An Australian, Peter Hoadley has developed an excellent free Options Analysis package which plugs straight into an Excel spreadsheet. For beginners it will take some time to understand but never let anyone tell you that making money in options is anything but hard.
There are some add-ins for the program which cost money but for most people these are not necessary, just go for the free version.
What Does The Software Do?
Basically it's a strategy analysis program which means you can use it to try and find the best strategy for your given view. You can also do a lot of what/ifs to project how much money you'd make/lose if the market or stock moves higher or lower over a given time-period.
All in all it's a fabulous piece of programming and if you don't have the Excel program you can get a free copy of a Microsoft Office clone, called OpenOffice.
Take your time understanding the software and make sure you take the online training guides and these help enormously. Also check out the LearnMoney.co.uk section on Traded Options for more help and information.
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