Option trading strategy


Option rookies are often eager to begin trading — too eager. Each option trading strategy less risky than owning stock. Most involve limited risk. For investors not familiar with options lingo read our beginners options terms and intermediate options terms posts. Using stock you already own or buy new sharesyou sell someone else a call option that grants the buyer the right to buy your stock at a specified price.

That limits profit potential. You collect a cash premium that is yours to option trading strategy, no matter what else happens. Option trading strategy cash reduces your cost.

Thus, if the stock declines in price, you may incur a loss, but you are better off than if you simply owned the shares. Cash-secured naked put writing. Sell a put option on a stock you want to own, choosing a strike price that represents the price you are willing to option trading strategy for stock.

You collect a cash premium in return for accepting an obligation to buy stock by paying the strike price. A collar is a covered call position, with the addition of a put. The put acts as an insurance policy and limit losses to a minimal but adjustable amount. The purchase of one call option, and the sale of another.

Or the purchase of one put option, and the sale of another. Both options have the same expiration. Thus, the higher priced option is sold, and a less expensive, further out of the money option is bought. This strategy has a market bias call spread is bearish and option trading strategy spread is bullish with limited profits and limited losses.

A position that consists of one call credit spread and one put credit spread. Again, gains and losses are limited. Diagonal or double diagonal spread. These are spreads in option trading strategy the options have different strike prices and different expiration dates. The option bought expires later than the option sold 2. The option bought is further out of the money than the option sold.

The likelihood of consistently making money when buying options is small, and I cannot recommend that strategy. Enter your email address.

OptionRobot is one of the best trading software systems. However, the feedback that we have been receiving from trading subscribers is by far the strongest proof that OptionRobot review endorses the software.

And this is the reason why we have dedicated this article for the correct use of the OptionRobot settings. Following the best trading strategies that we have listed above will definitely cut out a lot of time wasting strategies understanding what works best.

Trading remains one of the easier and most liquid ways of making money online.

With less jumps, the price range and trend option trading strategy during the first few minutes of market open can sets the tone for the rest of the day, making high and Figure 3. 3-dimentional accumulative profits for parameter optimization. Figure 4. Daily profits of IF1206 from Jan. 30th to March 21st.