Trading is not something you can do fulltime if you don’t have a stronghold on it. It is relatively more inclined towards the subjectivity that is imperative to its guidelines. Systematic trading is something you should consider because its rule-based and doesn’t take up too much time, once you have done your homework well. It’s all about the perfect execution of your methodology that fits your goal and desired objectivity.
Read to discover the ways to make money through options trading.
There are numerous ways to make money through trading options but before moving into that you need to understand the basics of trading options like call, put, and covered options.
- Put buying: If you want to take less risk by taking advantage of falling prices then a put buying option is going to yield you a lot of profit. There is a lot of risks associated with the short-selling position as there is theoretically no limit on how high a price can rise.
- Call buying: If the investor is confident about a particular stock, they allow traders to benefit by risking smaller amounts which eventually leads to the potentially indefinite benefit at the cost of the premium.
- Married put: This strategy acts more like an insurance policy when the stock price falls sharply while an investor purchases a financial asset as well as an option equivalent to shares.
- Covered calls: Covered call takes place when you are expecting a slight change in the underlying’s price of the stock and are willing to go for it. It is more like selling a call when you already own the underlying stocks.
- Bear Put Spread: When the investor purchases put option at a specific strike rate and sell the same number of puts at a lower strike price with the similar underlying assets and expiration date.
- Long Straddle: Sometimes, the investor knows that the price of the underlying asset is going to move significantly. Then long straddle strategy is put in place by purchasing a call and a put option with the same strike price and expiration date.
- Long Strangle: when an investor is not sure about the direction of an underlying asset, then a long strangle strategy is implemented.
- Long Call Butterfly Spread: When the investor combines different strategies for the same underlying asset and expiration date, then it is called a Long Call Butterfly Spread strategy.
Now is the time to formulate your strategies on the basis of your market research and decide which option would suit your situation the best. This is the main reason to know about options trading strategies For instance if a company’s stock prices are likely to rise in the near future, then a call option is ideal to purchase the stocks. Define your goal first, only then you would be able to find a perfect methodology to meet your goals.