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Friday 15 December 2017
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The Best Options Trading Strategies Explained

The Best Options Trading Strategies Explained

Strategizing is always a must when you are dealing with a difficult situation. This also applies inn options trading, a kind of online trading that involved contracts. Yes, an option is actually a contract where the buyer which is called the holder has the right to buy or sell the underlying asset but is not obliged to do so. This kind of trading is undeniably complicated especially that one should be familiar with the options Greeks or you will really have a hard time understanding their used lingo. It is just a good thing though that there are trading community forums that you can be part of so that you will be guided especially if you are a newbie inn this kind of activity.

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As mentioned, strategizing is a must when faced with a difficult situation and in options trading, these are the topmost strategies you should learn about:

  1. Covered Call – this entails buying completely and at the same time, disposing a call option on those same assets. This type of strategy is best for rookies and those who are already in this activity for years. This should be best applied when you are neutral to bullish and you are eager to sell stock once it reaches a particular price.
  2. Protective Put – here a long put position will be incorporated to a long stock position. This strategy will generate a floor price in which the stock value of the investor can’t fall. This is also best for rookies and those who are in higher level. When you’re bullish yet nervous, this is the best strategy.

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  1. Long Call – Here the underlying asset will be purchased at a particular strike price. Calls can also be used to purchase stock completely. This is only good for veteran and those who are in a higher level. When you’re bullish as a matador, you should remember this strategy.
  2. Long Call Spread – here you will be allowed to purchase a stock at a strike price A but you need to sell the stock at a strike price B. This type of strategy is best for veterans and those who are higher. If you are bullish but have an upside target, this strategy should be best.
  3. Long Put – through this strategy, you will be allowed to buy the stock at a specific strike price. When puts are used as part of the alternatives to short stock, the risk is constrained to the value of the options contract. This will be ideal for veterans and higher. You can choose this strategy when you are bearish as a grizzly.

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  1. Long Put Spread – obviously, this is the opposite of long call spread. It means you will be allowed to buy the underlying stock at a strike price B and sell it at a strike price A.

There are still a handful of strategies you can use. However, you should first learn about the basics of options trading and it is best to learn this from the pros.

About the author – Kim Klaiman is one of the experts in options trading and according to him, it is best to start from scratch if you want to be one of the best traders.