The US stock market is the largest in the world and consequently us stock options are among the most liquid and highly traded of all leveraged instruments. Compared to other countries like Australia and Europe, the US options market dwarfs them by comparison and due to popular demand, has so much more to offer.
You can buy or sell US stock options using any number of high profile online brokers such as ThinkorSwim, TradeKing or OptionsXpress (to mention a few). Brokerage fees are very competitively priced and the facilities some brokers offer, such as dynamic risk analysis graphs, placing complex spread positions online and tight bid/ask prices are all part of the service.
One of the benefits of this massive daily volume and liquidity, is that it is easy to intelligently assess and execute advanced option trading strategies. For the cautious trader, some great low risk options trading systems that generate consistently monthly income have been developed out of the simple fact that these positions are so easy to open and close.
You can even develop entire portfolios of options positions and as with any business, manage them "by the numbers". What this means is understanding the options greeks and learning how to adjust positions so that your delta is minimized and theta is maximised.
US stock options also include highly traded Exchange Traded Funds (ETFs) which are geared to the major indexes such as the Dow Jones Industrial Average, the S&P500 or the Nasdaq 100. The latter two include options for the SPY and the QQQ which are the most highly traded in the world.
If you like trading index options you really should consider these ETFs as a better alternative, because their option prices are much lower and more liquid than the index options themselves - and this provides much greater flexibility, particularly for the trader with a smaller capital base.
You don't have to be a US citizen to be able to trade US stock options either. The better options brokers such as those mentioned above, will allow you to complete an account application online from anywhere in the world. This includes completing a simple tax declaration for Non-US Residents. After that, you simply scan and email, or fax to them, the required identification documents and you're done. Within a day or two, your account is functional and waiting to receive your funds.
Speaking of your funds, if you don't live in the USA and your functional currency is not US Dollars, before you start investing with US stock options you should first assess the impact of how changing exchange rates will affect the value of your local currency against the US Dollar. For example, if you're an Australian resident and the current AUD/USD exchange rate is $0.93 to one US Dollar, a $AUD 5,000 deposit will only leave you $US 4,650 in your broker account to trade with. Should the value of the AUD subsequently rise against the US, say to parity, then you have already lost $350 in terms of your own currency before you even start trading. Of course, if it moves the other way while your funds are in US Dollars, you gain without doing a thing.
The direction of the US stock and futures markets heavily influences the performance of overseas markets. I remember a seasoned trading veteran once saying that before you trade in your local market, having a look at what the US markets are doing, is like putting your head out the window to see what the weather is like. Is it going to be a good day or a bad one?
Understanding the science and art of trading is one of the most profitable skills you can ever master. The US stock options market, together with the advanced option strategies it allows, provides the ideal match that can give educated traders the right to potentially choose their own rewards.
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