10 Options Strategies to Know

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Define Success to Have Success Best Options Strategies to Know Here are some of the most effective options trading strategies you can use in the right situation as a profit booster. Strategies will be matched with trading profiles to give you context as to who might enjoy using them. Selling Covered Calls Wikimedia Selling a call means writing a contract that gives a buyer the right to purchase shares of stock from you at the contract strike price. Because you are selling, you are taking in an immediate premium from the buyer, known as the time and intrinsic value of the option. When you sell covered calls, you are only writing contracts on shares you own.

Every trade is built using only Call options, only Put options, or a combination of the two. If you are excited or overwhelmed by the number of stock trading strategies available to learn, then you'll feel the same way about options trading.

Pros and Cons of Options Trading

There are a larger number of option strategies available to the options trader. I'm not a fan of information overload so I'll share a few basic strategies with you. One of the great benefits of stock options is their versatility.

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You can tailor a particular trading strategy to be conservative, aggressive, or somewhere in between. Here are just a few of the benefits of using stock options in your overall investment plan: You can benefit from a rise or fall in stock price without actually owning the stock.

You can position yourself for a big move in the profitable options trading strategy price even if you don't know which way prices will go.

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You can earn extra income off of your current stock holdings. You can buy stocks at a lower price then what they're trading at.

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You can protect yourself from losing money profitable options trading strategy your stock declines in price. Basic Option Trading Strategies The following option strategies are meant to be an overview, and to expose you to the extreme flexibility of options. Here is my word of caution, do not become overwhelmed with the number of option strategies that you will find on the web.

  • By Lucas Downey Updated May 29, Traders often jump into trading options with little understanding of the options strategies that are available to them.
  • This makes it pretty hard to decide which is the most profitable options strategy.
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  • When getting started with options, it is advantageous to work with strategies that allow you to be confident that you know how to open, manage, and close your positions.

Pick one or two strategies and learn all you can about them. Find the strategy that you like best and stick with it.

Options allow for potential profit during both volatile times, and when the market is quiet or less volatile.

At least until you make large sums of money. This lesson just goes over the basics. I trade a few advanced option strategies here and there, but I make most of my money just sticking with the basics.

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There are four basic option positions: long Call options buying Call optionsshort Call options selling Call optionslong Put options buying Put optionsand short Put options selling Put options. This was the life changing plan a millionaire gave to me many years ago.

Options traders, on the other hand, realize a profit can be made in any environment, even when the market doesn't trade up or down. Options contracts are flexible tools that make this possible, though some approaches are as risky and complex as they are versatile. Writing Options One way to profit from options in any market, as well as to employ even more sophisticated strategies, is by writing options.

Option Trading Strategies to Protect Profits Please keep this in mind. You will most likely hear someone say that stocks are bearish, or they are trading bearish strategies. Hence, bear markets are when stocks go down in price. Option Trading Strategies for Stocks that are Rising Hence, a bullish strategy is a strategy where you think stocks will rise in price.

People generally refer to the strategies as neutral trading strategies.