How to Trade Stocks & Options for Beginners

by Alexis Lawrence

Stocks and options provide ways of building savings and, when the market is favorable, growing wealth. However, when individuals first start out buying and selling stocks and options though, the marketplace can seem daunting. The stock trading pool may be the place for beginners to get their feet wet first before investing in options. The ins and outs of trading stocks is much more cut and dried than trading options, although both have about the same process.

Trading Stock

1. Find a brokerage house through which you can trade. If you would like to trade online, sign up for an account with a brokerage company such as E*Trade, ShareBuilder or Zecco. Enter all of the required personal information, including information for the bank account from which you would like to fund your online account.

2. Research the stocks that you would like to acquire. Buy shares of stocks that you don’t yet own by funding your account and choosing how many shares of each stock you would like to buy.

3. Hold stocks until you decide that you would like to sell them. Sell stocks once they gain in value, which can take a few days, a few months or a few years -- but keep in mind that they might never gain in value. When you want to sell shares, set up a sell order through the stockbroker with the sell price that you want for each share and how many shares you want to sell.

4. Continue buying and selling stocks in this manner to increase the value of your stock portfolio. This is the process known as stock trading.

Trading Options

1. Sign up for an account with a brokerage firm that allows option trading. Online companies with option trading include E*Trade, ShareBuilder and Zecco.

2. Write a call option for the stock shares that you have the right to buy. Like selling stock, this involves listing the number of shares available and the desired price for each share with the broker.

3. Buy stock options in the same manner that you buy stocks. Research available stock options for the company whose shares you would like to buy, and buy an option at the price listed. Unlike stock shares, you generally don’t get to choose the number of shares to buy, but must buy all of the shares included in the option.