You should already know what your trading horizon is, which will help you to predict the market’s behavior. If you’re just starting to learn about stock-option trading, see our beginners’ video about the basics of option trading, or join our live video chat on Tuesdays to learn more. We also offer a free “Basic Package” with our beginner’s package and trade plan. You can start trading now, without having to purchase anything and without having to wait for us to update the pricing and options list.
How does margin trading work?
Leverage is the profit you’ll make by selling your position. Margin trading is different than traditional option trading where you use cash to buy shares. Margin trading is a way your broker does much of the work to make sure you get the proper price for the position. This means that the broker doesn’t get paid by your trade but it does make money by taking a commission in the long run when your trade closes. You’re not using leverage to make a profit. You’re simply getting paid to hold your position.
How do I buy and sell shares using margin?
Leverage is the difference between your profit and risk. A long position is one in which you want to make more money than your risk, i.e. to sell a position and buy another to make more money. You need to purchase an equivalent number of shares with a short position to make a profit, but this means selling a position and buying another to take on a position in which you already have shares. The difference between buying and selling with margin is that margin traders are buying stock that they want to sell at a premium to their price. With margin, you’re trading stock that you already own for the profit you’re hoping to make, when you’ve sold the stock before, a short position allows you to buy a share you already own at a discount of the current market price.
What is a short position?
A short position is a place where you’re willing to put money you earn trading a long position to buy a share of a stock that you want to add in to your position without taking any short position. If you’re shorting a position, you’re waiting to get that profit until the position closes the price rises a little.
How do I buy shares using leverage?
Leverage is the profit you’ll make by selling your position. Margin is the price you want to get for the shares you buy.