Option Trading Strategies: Earn a Living Trading Options – Video 1 Part 1
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Are you making huge profits in the investment game? It’s important to put together a well-diversified and comprehensive portfolio that features stocks, bonds and mutual funds. You’ll realize with time that carefully selected investments, your money will grow over moderate time horizons, resulting in true income. But are you adequately integrating stock options through proven option trading strategies? If not, it is certainly time to expand your horizons and consider stock options.
Stock options are like future term contracts that revolve around the constantly changing value of an underlying asset. When buying a call, for instance, you purchase the right to buy the asset at the strike price at any point before the expiration date. For paying the premium, you are awarded the privilege though not the obligation to purchase the asset at the locked in strike price.
There are several different directions you can go with option trading strategies. For example, you can choose to buy a call or a put. Additionally, you can assume the opposite side of the equation by selling calls and puts to others and collecting premiums. If you’re dealing with purchased options, you also can decide whether or not you’d like to exercise or trade the option on the market.
So which one of these many avenues is best for you? Well that all depends on your personal budget, preferences, and tolerance for risk. Buying calls can be risky, for instance if the value of the underlying asset decreases you can lose all principal investment. On the other hand, it offers the best opportunity to score big on discount stocks.
With selling calls, you’ve got the guaranteed income from premiums but the risk of losing money in the long run depending on the options original value.
Ultimately, if you’re purchasing a call or put, you’ve got to determine what options trading strategy you will adopt. The great thing about options is that they give you…well…options. Multiple ones, in fact, to help you determine what works best and follow that. For instance, you can choose to exercise the option, buying or selling the underlying asset prior to the expiration date. This will work in some situations but simply be inapplicable in others. On the other hand, letting certain options expire will prove to be the most effective way of minimizing losses. Lastly, trading an option in the market is a popular choice to make money before the full maturation of the security.
Any way you cut it, options are easy to use for investment purposes and option trading strategies are popular for this reason.
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