Options Trading Strategies

If you trade options, you know the importance of making responsible, lucrative deals. At the end of the day, you’re putting capital on the line and thus depending on a successful investment. But how can you be sure your strategy is one destined to succeed in an unpredictable, speculative market? You’ve got to employ proven, well-thought out options trading strategies that rely on past, present, and future circumstances to make valid predictions.

To understand the multiple directions, you should comprehend the objective of exchanging stock options. The value of an asset can move up, down, or it can stay at the same value over a specific period of time. Depending on the type of option you’ve invested in, a call or a put, each direction provides you gains or losses.

 A Call

One of the very basic options trading strategies is buying a call. When you invest in call options, you secure the right (privilege but not obligation) to purchase a particular asset at a particular price before a particular date. Quite particular, isn’t it?

For example, suppose you purchase the call option Google June 600. This would provide you the luxury of purchasing 100 shares of Google for $600 a pop at any time before June. You do not have to, however, and most will not exercise the option if it will result in a loss.

At the same time, being careful with calls is a must as premiums for stock options can be high. Calls can be a great way to take advantage of a bullish economy when you speculate an asset will rise in price significantly (at least enough to justify the premium) prior to the expiration date.

A Put

When you choose to invest in a put option, you reserve the right to sell an asset at the particular strike price prior to the particular expiration date. It is essentially the opposite of a call, which is the buyer version of a put.

Using the same example, if you purchase the put option Google June 600, you have the privilege though not necessarily the obligation to sell somebody the stock at the prior agreed upon and contracted strike price. In this scenario, a bullish market will benefit the buyer.

When you purchase a put, you are expecting the asset’s value to decline enough to justify the premium expense, providing you a profit from the transaction. If Google, by June, goes falls to $300 per share, you’re selling for twice the market rate and making a lucrative deal.

It’s always wise to look into more advanced options trading strategies as well and choose a plan that works for you, your budget, and your portfolio.

Option Trading Strategies: Earn a Living Trading Options – Video 1 Part 1

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