Stocks & Commodities V. 31:13 (46-50): Swinging Trades With Steven Place by Jayanthi Gopalakrishnan

Swinging Trades With Steven Place by Jayanthi Gopalakrishnan

Consistency Is Key

Steven Place is a professional trader specializing in swing trading equity options. He focuses on structuring trades to exploit quantitative models and technical analysis while minimizing risk through portfolio hedging. He has been profitable in both bullish and bearish environments.

Stocks & Commodities Editor Jayanthi Gopalakrishnan spoke with Steven Place on January 23, 2013.

Steven, tell us how you got interested in trading options.

I run a website called “InvestingWithOptions. com,” where we look to make people better option traders. Back in 2006, when I was still in college, I got interested in the stock market. After using more traditional investing techniques with only stocks, I started to read up on derivatives — futures and options and forex.

My background is in electrical engineering, specifically wireless signals and cellular phones and things like that. The math and statistics used in signal analysis carries over very well when you’re learning the math behind options. You don’t need to have an applied math degree to understand options, but it helps. It gave me an affinity toward options and I understood it very well. That’s when I picked up option trading to use in my own trading.

What do you do now?

I trade full-time and I also run InvestingWithOptions. com. We have a chatroom for idea generation and have developed a good community of option traders.

I take it you’re in tune with option traders’ needs.

Yes. A lot of people who join Investing With Options are new to option trading. So I understand what people need when it comes to understanding options and learning to trade them confidently.

What are some of the common mistakes you see among people who want to start trading options?

One of the main problems I see with newer option traders is that they view options as just a leveraged stock play, where they can get access to 100 shares of stock for 10% of the cost. But with options, other things affect the pricing of an option. It’s not just stock price movement. When you trade options, you need to not only care whether the stock is going up or down, you also need to care how fast it is going to move, and how long it is going to take to get to your price target because options have a time expiration.

There are other things — those things known as the greeks — that affect the risk of the option and affect the profit and loss of the option. A lot of people will come to me and say, “I bought a call and the stock went higher, but I didn’t make as much money as I thought.” That’s because they were not including those extra components in the option pricing.