When it comes to options trading strategies, you’ve got your simple trades, and you’re not-so simple trades. Some are just a matter of moving the right money to the right place, and some seem so over complicated that even the most determined mystery novelist would be incapable of wrapping his head around it. But no matter how complex these strategies get, they all have one commonality at their core: some are call types, and others are put types. If you are looking for the best option trading strategies, here are 3 of the simplest to get you started.
*1 The Long Call/Put
These are simple wagers, where you bet either on the underlying stock in question rising (call) or falling (put) by the deadline. This, if the wager falls in your favor, will result in a massive payout for you. However, there is a risk. If the wager doesn’t work out for you, then not only do you lose the money you put forth, you get no stocks, and get a hefty cost afterwards. So if you seek out this strategy, proceed with caution.
*2 The Covered Call
There are two parts to this strategy: first, you, the investor, must own the stock in question and then sell a call on it. You then give away all appreciation that’s higher than the strike price, and in exchange you get a premium payment. You then bet on the stock staying flat or if it does go down, it doesn’t decrease by anything notable. This will allow the seller of the original call to get not only the premium payment, but you get to keep the stock as well. Unlike most variants on default business strategies, this one is much lower risk with a pretty high reward, and is thus a favorite among investors in need of income.
*3 The Married Put
Like its sister, the covered call, this is a bit more refined than the default setting. It’s essentially a long put mixed with the distinction of owning the underlying stock, hence the two being “married”. Now, for every 100 stock shares, you then buy one put. This will ensure that you can continue owning stock for potential use, while still hedging your position should the stock fail. It’s similar to buying insurance and paying a premium to protect against asset decline.
For other strategies, and advice on how to implement them, look for sound advisory services from Trade Genie.
