What is Virtual Option Trading?

Virtual option trading refers to the online service offered by certain investment firms and independent companies that allows investors to simulate options trading. These services may be offered for free or for a small fee and may come in the form of contests with other virtual investors. Individuals who practice virtual option trading are given a virtual account and make simulated trades that affect the account based on real-world options prices. It is a good way for novice investors to get a handle on the complicated nature of options trading.

For many investors, their investments boil down to buying and selling stocks, which is a relatively straightforward process and easy to follow. Options trading, while a bit more complex and involved, offers far more possibilities than stock trading and also offers the potential for more significant profits from fewer trades. A novice investor may be overwhelmed by all of the terms and numbers he has to deal with on the options market, yet he still may be intrigued. Such an investor should consider virtual option trading as an excellent way to practice without incurring any risk.

To begin virtual option trading, an individual must first decide on the website. Many investment firms offer virtual trading in the hopes that the investors who partake in it will become familiar with a firm's site and choose to stay with it when they begin to makes real trades. Other websites are run independently and are set up in the manner of fantasy sports sites. These sites pit virtual investors against each other with the potential for prizes for those who do the best with their simulated trades.

Once the site is chosen, individuals are given a certain amount of simulated capital with which they can make trades on the options market. Their virtual account will then reflect the success or failures of those trades, based on the actual prices of the options traded. For example, if a certain practice trade made by a virtual investor would have netted an actual $500 US Dollars (USD) if executed for real, then that amount of money is added to the virtual account.

Options trading, which is highly speculative in nature and requires not only knowing which way the underlying stocks are going to move but when they're going to make that move, is a process that may certainly require practice by newcomers, which is why virtual option trading is a good way for people to get their feet wet with no risk of actual money loss. Seasoned investors may also wish to try it out as well, as it affords them the chance to attempt unproven strategies with no actual consequences. Should some of these strategies prove successful in their virtual accounts, then they may wish to implement them in the actual market.