Posts Tagged ‘Options Trading Articles’

Bullish Option Trading Strategies: Long Call and Short Put

Monday, October 31st, 2011

Any experienced option trader in the market knows the only way to get success in this niche is having some good option trading strategies. But recently, option trading became a wider market with the introduction of internet option trading. More and more people are getting interested in this mode of investing. After getting preliminary idea of the trade, they are being interested in simple but good option trading strategies.

First of all, let’s get the idea of option trading little revised. Options are contracts that give the buyer of the contract the right but not the obligation to buy or sell, depending on the type of option, some stocks at a fixed price. The fixed price is called strike price. Options have a date of expiry and if the stocks are not bought or sold in this time, the options become worthless. Options are two types, call options, giving the right to buy stocks and put options, giving the right to sell stocks.

So, for the new traders, there are basically three types of option trading strategies,each having their own characteristics and application.They are Bullish, Bearish and Neutral. Bullish strategies are applicable when the prices of the underlying stocks are supposed to go up. Bearish strategies are the opposite, counting on the price to go down. Neutral strategies benefit from the price being stable.

Bearish strategies can be various types, including very complex ones. These strategies usually depend on buying call options or selling put options. They get benefited from the rise of the stock price. The simplest one is the long call option.

Long call option is buying a single call option. It has potential for unlimited profit with a minimum window for losses. This strategy is applicable when the trader strongly believes the prices will go up, and increase enough above the strike price to cover the price of the option and give them a good profit. In this strategy, the trader buys a call option at a specific strike price, often a little higher than the current market price of the stocks. Then, if everything goes as planned, the price of the stock increase and the trader buys the stocks at the strike price, sell them on current market price and pocket the difference. If something goes wrong, the trader does not buy the stocks and lose only the price they’ve paid for the options.

Short put option is selling a put option. It is much riskier than other option trading strategies. If the prices go down a lot, it can cause major losses. But if everything works out right, the priced go up the trader can make some major profits. If the option buyer is still interested in selling the stocks, the trader gets the stocks at the strike price as well as the price of the option. And if the option buyer doesn’t sell the stocks, the trader still gets the price of the option.

So, as we can see from these simple option trading strategies, a good knowledge is very necessary to decide which strategy to take. For new traders, it is hard to keep track of all the factors in the market. So, contacting licensed consulting firms and brokers is advised.

Learning to Trade Options – An Introduction For Beginners

Monday, January 11th, 2010

In general, trading is not something anyone can simply jump into; it is a technical field and if you wish to get into it, having a basic understanding of what it is or how it works is not enough. You have to have a thorough knowledge regarding the kind of trading you are interested in. In a nutshell, you are not going to get far in this field if all you have is a basic knowledge. For instance, if you want to be successful in options trading, you need to be continually adding to your knowledge of this discipline.

Here are a couple of options trading tips to help you get up to speed.

1. Familiarize yourself with and master the options trading lingo.
The options trading lingo is very complex, which may be why there are not many people who choose to go into this kind of trading. However, as you become familiar with the basic terms and you understand a little more about the subject, you will be able to gain a better understanding of how it works. Note that just knowing the terminology is not going to make you a successful trader; however, having a good familiarity with the terms will definitely put you on the right track to doing well in this area.

2. Go to online and offline workshops and seminars.
You can get yourself on the fast track to learning to trade options by attending workshops and seminars, whether they are online or offline. You can also subscribe to online tutorials. Most options trading seminars cover all knowledge levels. If you are just starting, start with the basics and then continue to add to your knowledge by going to more seminar series.

3. Take advantage of online tutorials.
You will find many companies offering online tutorials and you can benefit by subscribing to these. Usually, these online tutorials comprise of interactive modules wherein you learn by doing.

4. Buy or borrow books on options trading.
While you will find a plethora of information on this kind of trading on the Internet, sooner or later you will notice one thing: they keep repeating the same information. You can benefit greatly by reading books devoted to the subject. You will find hundreds, if not thousands, of books written about options trading. Don’t just read the first book you come across. Go with books that are authored by the experts who are well-known in the trade. You want to learn from the best people.

After you have read a few good books on the subject, you will be in a better position to understand the technical analysis, which involves looking at charts, becoming knowledgeable on the different market analysis tools, identifying the different options you might want to trade, and using strategies that will bring you the most returns.

Options Trading Essentials for Beginners

Monday, January 11th, 2010

Before starting any options trading or even think about it, you should to begin with be knowledgeable about the important facts as well as various elements related to options. In options terminology, an option is considered as a contract entered into by two parties. One party is the seller and the other party is the buyer in options terms.

According to the option trading agreement, the buyer has the permission to acquire or sell a mutually agreed upon asset at the approved price, on or before a particular date. The asset that is traded is considered as the primary asset. The established price is known as the strike price. On the other hand, the buyer is not under any particular obligation to purchase or sell and the buyer might choose not to take action upon the contract. If this occurs, the seller has the right to take a payment from the buyer instead of the option and this payment is known as the premium.

In option trading, there are two types of options.  One type is considered as call option and the other type is considered as put option. The buyer is entitled to purchase the approved upon asset under the call option, while the put option entitles the buyer to sell the asset. According to the options trading agreement, the seller should buy or sell the primary asset at an approved price. Then again, the buyer has the option of choosing to forego the right and allowing it to expire. In this case, the premium amount received by the seller remains with the seller whereas the buyer has no right to it. The primary asset can be any type of security, such as derivatives instrument such as futures contract, a bond or a stock, or a piece of property.

To learn how to make money on the stock market trading options, attend one of our Power Workshops on Options Trading offered every Thursday for FREEClick HERE to register now.

Agenda For Two Day Seminars — Advanced

Friday, November 27th, 2009

third_lastThis seminar entitled Options Trading Strategies Intermediate is the second in a series of three seminars (more…)