5 Options Strategies to Know While Trading - Make Money Online

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5 Options Strategies to Know While Trading

Options are great tools for both risk management and position trading. However, the key to profitable options trading is using the right strategies. Hence, it’s very important to get a solid understanding of the different options trading strategies, so that you can achieve your financial goals. If you put in a bit of effort, you can learn how to take advantage of the flexibility offered by options as a means of trading. Whether you are a seasoned or rookie investor, these five strategies will surely help you make the most of options trading: - 

Covered Call 

In a covered call strategy, the assets (stocks that you already own) would be purchased outright and a call option will be simultaneously written on those same assets. However, the volume of the assets owned should be equal to the underlying assets in the call option. This strategy is generally utilized when the investors want to generate additional profits and have a short-term position and neutral opinion on assets. This strategy is also applied as a protection against a potential decline in the value of an underlying asset.


Cash Secured 

The cash secured strategy involves selling a put option on a stock that you want to own by choosing a strike price. The strike price represents the price that you are willing to pay to purchase a stock. Once you buy a stock by paying the strike price, you can collect a cash premium in return. However, if you choose not to buy the stock, you can still keep the premium. You are considered to be cash secured if you maintain enough cash to buy shares in your brokerage account. 

Bull Call Spread 

Under a bull call spread strategy, an investor simultaneously buys call options at a specified strike price and sells the same number of call options at a higher strike price. However, a point to be noted is that both the call options will have the same underlying asset and expiration month. Investors usually adopt the bull call strategy when they anticipate a moderate rise in the underlying asset prices. 

Bear Put Spread

The bear put spread strategy is a variation of the bull call spread strategy. Under this strategy, the investor simultaneously buys call options at a specified strike price and sells the same number of call options at a lower strike price. Both the call options will have the same underlying asset and expiration month. Investors usually adopt the bear put strategy when they anticipate a moderate decline in the underlying asset prices.

Protective Collar 

The protective collar strategy involves purchasing an out-of-the-money put option and simultaneously selling the out-of-the-money call option for the same underlying asset. This strategy is often used by investors in the derivatives market after a long position in a stock has experienced considerable gains.
5 Options Strategies to Know While Trading 5 Options Strategies to Know While Trading Reviewed by Parvesh Bravo on 4:08 AM Rating: 5

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