Options trading can be exciting and profitable—but also risky if you don’t know where to start. Maggie Roth (78) has taught beginners options trading for many years. In this video interview, she explains the essential first steps of options trading for beginners.

Watch Maggie explain options trading for beginners

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Maggie Roth

Maggie Roth is a seasoned options trader and educator with decades of experience in the markets. Known for her practical, no-nonsense approach, she has mentored thousands of traders and specializes in helping beginners navigate the complexities of options trading. Her trading journey began in the 1970s. She runs the options trading education service Investing Buddies.

What is options trading?

At its core, options trading allows you to control stocks without fully owning them. This provides leverage, risk control, and profit potential, making it a powerful tool for traders.

There are two types of options:

• A call option gives you the right to buy the underlying at an agreed price before an expiration date.
• A put option gives you the right to sell the underlying at an agreed price before an expiration date.

Why trade options?

Maggie explains three key reasons why traders choose options over stocks:

• Leverage: Control large stock positions with a fraction of the cost.
• Risk management: Limit potential losses compared to buying stocks outright.
• Higher profit potential: Options can generate significantly higher percentage returns measured against the capital you risk.

The first steps in options trading for beginners

If you’re new to options trading, here are some steps to follow before placing your first trade:

Learn the basics

Maggie simplifies options trading by comparing it to real-life scenarios, like putting a deposit on a property. She covers the two main types of options—calls and puts—and explains key terms like strike price and expiration date. A call option gives you the right to buy a stock at a specific price, while a put option allows you to sell it. Understanding these basics is crucial for building a strong foundation.

Choose the right broker

A good trading platform is essential. Maggie highlights key factors to consider:

• Fast order execution
• Strong customer support
• Risk control features
• Paper trading availability for practice

Start with a simple strategy

Maggie recommends starting with strategies that are easy to understand and manage, such as:

• The Wheel strategy (selling puts and covered calls to generate income)
• Buying calls & puts (learning directional trading before moving to advanced setups)
• Vertical spreads (a great way to manage risk while trading options)

Avoiding common beginner mistakes

Maggie warns that many new traders make costly mistakes, such as:

• Risking too much money on a single trade
• Trading with emotions instead of a strategy
• Ignoring risk management rules

She strongly advises beginners to limit risk to 1-2% of their account per trade and to always practice with paper trading before using real money.

Three options trading for beginners tips

Maggie emphasizes that successful options trading requires:

• Proper education – Learn from experienced traders.
• Understanding market psychology – Stock prices move based on trader sentiment, not just fundamentals.
• Patience and discipline – Take the time to learn before rushing into trades.

Where to learn more

Maggie Roth recommends two books that explain the basics of technical analysis, in particular candlestick patterns: