Top 3 Options Trading Strategies
If you want to get involved in stock options you need to have a number of strategies you can follow to try and make money in this way.
Needless to say with this kind of involved strategy you should learn as much as you can before even attempting to make money.
It is not as simple as buying stocks, hanging onto them and hoping they will appreciate in value.
So let's take a look at three ways you can make money with stock options.
1.
Work on a smaller time scale than you would with normal shares.
Always remember that you are investing only for the short term.
An option will only remain open for a specified amount of time.
So let's say for example your option is 'live' for four weeks.
You need to make your decision on whether to buy or sell in a shorter time period than that.
If other people are looking to buy an option they want to see a decent amount of time left on it.
Otherwise they are buying something that is about to expire.
2.
Hedge your bets to give yourself more options.
Have you ever heard of a put option? You will if you start getting involved in stock options.
There is always the chance that a stock will depreciate in value, and if you think this might happen you can purchase a put option that acts as an insurance policy against this happening.
If it does drop in value you can sell at the level you 'insured' your stock at.
This is a put option and you need to buy it in advance if you think you have a stock that will go down in value instead of up.
This means it is possible to make money even if a particular stock goes down in value.
3.
Buy the stock with a call option.
Stock options mean that you have options - they don't mean you actually own that stock.
So if you want to buy it because you feel it will go up in value at some point, you need to exercise a call option to do so.
While some investors only ever stick to using put options, some will also buy stock with call options.
This gives them the chance to take ownership of that stock.
So consider each of these aspects carefully before deciding which stock options trading strategies you want to use yourself.
And remember that the more knowledge you have, the more chance you have of making a profit from them.
Needless to say with this kind of involved strategy you should learn as much as you can before even attempting to make money.
It is not as simple as buying stocks, hanging onto them and hoping they will appreciate in value.
So let's take a look at three ways you can make money with stock options.
1.
Work on a smaller time scale than you would with normal shares.
Always remember that you are investing only for the short term.
An option will only remain open for a specified amount of time.
So let's say for example your option is 'live' for four weeks.
You need to make your decision on whether to buy or sell in a shorter time period than that.
If other people are looking to buy an option they want to see a decent amount of time left on it.
Otherwise they are buying something that is about to expire.
2.
Hedge your bets to give yourself more options.
Have you ever heard of a put option? You will if you start getting involved in stock options.
There is always the chance that a stock will depreciate in value, and if you think this might happen you can purchase a put option that acts as an insurance policy against this happening.
If it does drop in value you can sell at the level you 'insured' your stock at.
This is a put option and you need to buy it in advance if you think you have a stock that will go down in value instead of up.
This means it is possible to make money even if a particular stock goes down in value.
3.
Buy the stock with a call option.
Stock options mean that you have options - they don't mean you actually own that stock.
So if you want to buy it because you feel it will go up in value at some point, you need to exercise a call option to do so.
While some investors only ever stick to using put options, some will also buy stock with call options.
This gives them the chance to take ownership of that stock.
So consider each of these aspects carefully before deciding which stock options trading strategies you want to use yourself.
And remember that the more knowledge you have, the more chance you have of making a profit from them.
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