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Options Trading Techniques and Strategies That Work in the Market

Options Trading Strategies that Work
This article aims at presenting to you some of the proven options trading strategies that work. Read on to know more on how to make decent profits with these strategies.
WealthHow Staff
Last Updated: May 31, 2018
Trading in the stock market requires a lot of knowledge about market trends and a thorough research about the fundamentals of a company in which you will be investing. It has been observed that the number of successful people in stock trading are very less. This can be mainly due to the lack of knowledge of best options trading strategies.

Options Trading Techniques

First of all, it is vital for all people indulging in option trading to understand that options are derivatives based on assets. Options on assets could be bought or sold at a specific price, during a fixed period. In case you decide against buying or selling the asset, you will be losing the amount which you have paid for the option. Buying calls is believed to be the best options trading strategies that work in a bull market. In this case, you can benefit, only if the price of your stock goes up sharply before the date of expiry. Thus, making a smart judgment, at the right time, is essential to earn money by the way of stock investing or trading options in a bull market. Then, there is the bull call spreads strategy in which you will be selling high strike price calls and the earning will be through the spread between two strike prices. Strike price is that price at which the underlying stock can either be purchased or sold. Call options can help you to own stocks for a long time before the date of expiry arrives.

Put options give you an opportunity to sell your assets at the decided prices at a fixed time. Another good strategy is to make sure that the strike price should always rise in the case of calls, and slide in the case of puts, before the end date, to get good profits. The overall return on investment would be phenomenal, if you have perfect timing between your buying and selling decisions.

Options trading can be understood by conducting a good research of the stock market. You need to spend some time with professional stock option traders and learn the basics, instead of venturing out into the stock market directly. Only experience can teach you the tricks of options trading. The first thing which you should learn is to study the technical charts of the stocks which you are interested in buying. The weekly and monthly technical charts can help you predict the future movement of a stock, which will in turn help in taking right buy and sell decisions at the right time. You should also understand that there is a great amount of risk in options trading even though it can be extremely financially rewarding at times. You can suffer from a heavy capital loss if you buy stocks at the wrong time. Consistent stock research is the key to becoming a successful options trader. It has been observer that many people are fully dependent on the so-called 'hot tips' given by brokerage houses and television channels. Though there is nothing wrong in referring to these tips, you should yourself be aware of what you are doing in the market. Understanding the transactions is essential if you want to make trading options for a living. Investment in option trading is generally for a short-term period.

The strategies mentioned in this article will guide you in the right direction and help you earn an alternative source of income through the stock market. So, start researching and use your intelligence to trade successfully!

DISCLAIMER: This article is just for reference purposes and does not recommend any stock market transactions.