ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Paper Trading Options

Updated on April 28, 2010

Paper Trading Options

So what would be the benefit of paper trading options, or paper trading anything for that matter? Some might argue that it’s a waste of time, and that you just need to “jump right in” to the markets without any prior preparation, because there’s no teacher like experience, right? Well, there’s more to paper trading than meets the eye, and if you maintain an open mind about it, it’s very possible that you’ll begin to derive great benefit from it. Paper trading, for those who may be unfamiliar with the term, is basically a “fake” trading account that you maintain and oversee, where you place fake trades based on actual market movements, just to get a feel of what the markets would be like if you were trading them with real money. To many, paper trading provides a way to refine their trading techniques and philosophy, as well as to hone their skills of identifying the proper entry and exit points in the market during real trades. When you paper trade options, you use actual market data, and select whatever option chain you want to follow, and then you select which option out of the chain you want to actually purchase (or sell, if you’re writing the option), then you place a “fake” order, you determine your entry point based on the most likely price you would have been filled at if you were to have placed the order for real, and then you monitor the trade every day, keep track of daily profits or losses, and then finally place a “fake” order to exit the trade, and determine the final net profit or loss of the trade. All of this is for the purpose of understanding and refining your own trading methodology even better, and for you to understand what moves you may make based on how the price action of the market is flowing.

Image courtesy of Microsoft Office Clip Art
Image courtesy of Microsoft Office Clip Art

Paper Trading Options: Virtual Trading

When paper trading options, you have to keep in mind that with many of the virtual or fake trades that you place, actual market conditions may vary greatly from how it played out in your virtual trade. A cool thing that many online brokerages (and even the CBOE now) have done is to give all account holders access to a virtual trading platform, where you can basically paper trade options using real order screens. The virtual trading software will track your trades and tally your profits and losses, just as if you were really in the actual trade. You start the virtual account with an amount of starting capital, and any trading profits or losses you incur will be added to (or deducted from) your virtual account balance. It’s really no different than a flight simulator that a pilot would use for training purposes; these types of virtual trading accounts can provide good training and give you a decent real-world feel for how trading the markets actually works. I would highly recommend paper or virtual trading to newcomers to the markets, simply because it gives you a better understanding of how real-money trading works, without the risk of losing real money. If you want my personal recommendation, OptionsXpress has a great virtual trading platform if you are an account holder (which I am—shameless plug for them right there). They provide this virtual platform for stocks, options, and commodities. One caveat that I have to mention is that although paper trading options can give you a great starting education, and I highly recommend that every beginning trader do LOTS of paper trading before starting to trade with real money, I must admit that once you have real money on the line, your emotions come into play, so your performance with the virtual trading account may or may not match what you will do in a real-world trading environment. I can personally attest that there are a lot more emotional challenges and personal discipline challenges you have to face when real money is on the line. Just keep that in mind; I’m definitely not knocking paper trading options or any other derivative for that matter, but just remember, you never fully know how you’re going to do until your actual hard-earned money is on the line.


    0 of 8192 characters used
    Post Comment

    No comments yet.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
    ClickscoThis is a data management platform studying reader behavior (Privacy Policy)