Having traded stocks for over a decade, I've recently gotten very involved with options. I find these to be a great means of expanding my risk portfolio a little bit, and the rewards of a successful trade are truly a great thing.
I would advise you to study up on options as much as you can before you begin trading them. Too many people learn the hard way by losing the entire amount of their investment. Don't let that be you. Here are a few words to the wise that I hope you'll take seriously.
The first thing I'd like to talk about is the time decay factor. Options tend to deteriorate in value over time due to the fact that as you're further out from the expiration date, the likelihood of volatility is higher.
Once the expiration date of the options contract approaches, this price gap will begin to close, as the prices of options decay. Those people who bought these contracts months before and still hold them will see their investments shrink relative to the movement of the stock. Therefore, you don't want to buy options and hold onto them for too long.
Additionally, the concept of protecting your investment on an option trade is a really important one. Too many people throw all of their eggs into one basket, not accounting for the possibility of the opposite of what they expect.
It might end up cutting down on your profits a bit if you win, but this will really hedge you if you lose big time. I've seen way too many people lose everything they invested, simply for the fact that they failed to hedge.
Had they hedged by giving up just a few dollars, they would have kept 90% of what they lost.
By adhering to these tips, I'm sure of the fact that you'll be well ahead of the typical novice.
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