• Option Strategies

    Aggressive option strategies that deliver the power needed to boost your trading account.

    For everything that requires any voluntary action in this life, you can bet there is a strategy to provide the best result, and having a strategy for trading options is no exception. Good ideas, plans and serious maneuvers to promote your success trading options is what we are going to talk about. Ready? Let’s think about this.

    Different Types of Option Strategies

    1. Trade Low Priced Options Strategy

    There are option traders who only buy under priced options and I’m going to list that as the number one strategy. Of course, what’s new about that? Everyone knows buying an undervalued stock is a smart move, and trading stock options has already established itself as one of the preferred methods of investing.

    Now, if you are just “experimenting” in trading options and haven’t yet decided if it’s your thing, it’s a lot easier to swallow a loss of a low priced trade instead of having to lie to your wife about what it really cost you. Well, another way to look at it is that your overall percentage gain on a lower priced option is going to higher than a gain on a “rich boy’s” option, and, conversely, the percentage of loss will be less. When your position moves “into the money,” take those nice profits and hit the exit button.

    Also, the underlying instrument of your option doesn’t have to be going up in price either. You can make some serious gains taking advantage of falling market prices. It’s the strategy of trading low priced option strategies that makes the difference.

    2. Trade Stock Options Strategy

    I don’t see how you can lose if you use this strategy and also number 1. If you take the time to understand option strategies this is your chance to get in the game with very little money up front. When you believe a stock price is going to increase, you buy a call option (remember one option contract represents 100 shares of the actual stock) for very little compared to the cost of the stock itself. If I want to buy 100 shares of the latest fad “Purple Popcorn,” (PP), at $40/share, I would have to cough up $4,000. But, instead, I can buy one call option of PP for maybe only $20. Now, that’s a no-brainer, right? What you need to remember though is to look for inexpensive options that are also close to the money (meaning the strike price of the option strategies is near what the stock is currently trading  at), and try to look for far out expirations (giving you the advantage of more time).

    Option Strategies Can Be Used To Grow Capital or Preserve Wealth

    3. Call Options Strategy

    This of course is a very generic type of options trading. While it’s simple and straight-forward, you can lose your milk money in a quick hurry if you don’t have the proper option strategies. Some traders would not dream of positioning themselves in anything but a call trade and planning on increasing prices. The thing is to do your homework and make it work for you.

    4. Put Options Strategy

    Trading an option strategy than includes puts ensures you profits in a falling market. When that quick pullback occurs, you aren’t left in the red. If you buy puts, your strategy is that you want the price of the underlying instrument to decline. It’s obviously the reverse of the call option strategies, and it has its place. There are those who prefer this option strategy above all others.

    5. Three Point Trading Range Strategy

    This may not work for the newbie, but it does in fact work. Once again, using the stock option strategies as the example, if you look for a stock that is moving in a three point range, enter your call option strategies position when the stock price is at the low of that range. In reverse, enter your put option trade when the stock price is at the high of that range.

    6.  Take a Percentage Profit/Loss Strategy

    Another popular options trading strategy is to predetermine what your profit plan is and stick with it. If you decide you want a 15% profit or if you decide the most you are willing to lose is 10%, set that into your overall strategy and trading plan. Place your trading limit orders accordingly. This strategy lowers your risk considerably. After all, your goal is make more winning trades than losing trades and utilizing a percentage strategy will get you there and this remains one of the best option strategies.

    7. Think of the Future – Get Long Term Gains by Trading LEAPS

    Normally, trading options is a day trader’s mode of investing, but if you are interested in the “buy and hold” strategy, LEAPS are for you. You can hold your position for over two years before expiration. A LEAP is a regular option that has a long-term expiration. The stock option strategies has a long time to move around in its chart. Just think of what all has happened in the market in the last eighteen months – all that change has affected every stock, commodity, index, and so on. You can use that time to your advantage.

    Investing in LEAPS option strategies is a very popular options trading strategy and it also helps for a better night’s sleep.

    There are of course many more advanced option strategies than we have touched on here. We’ll save that for another lesson or you can check out this site http://www.888options.com/resources/literature/files/options_strategies_quick_guide.pdf  But in the meantime you can take advantage of some of the things we have mentioned. It’s not hard, just remember to fall back on your Boy Scout training, and “be prepared.”

    All option strategies are not created equal so it’s important to perform your due diligence and not be afraid to roll up your sleeves and study intensely to achieve success.

    © 2011, www.daytraderoptions.com. All rights reserved.


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