Options trading tactics, span from generating income into your stock portfolio on a regular monthly basis, guaranteeing any downside in a particular stock you may well be holding in your portfolio and a method to leverage both the upside of the market and the down-side, all simultaneously.
Options trading tactics, span from generating income into your stock portfolio on a regular monthly basis, guaranteeing any downside in a particular stock you may well be holding in your portfolio and a method to leverage both the upside of the market and the down-side, all simultaneously.Now, if you’re like me and need to monitor your portfolio increase in value overtime, whereas having the prospect for revenue, (which everybody reading this is likely saying no) then you need to understand all the option trading strategies that are possible for you.To provide you with an example of a good option trading strategy that you can implement at this moment is the selling of covered calls. This simple option trading strategy will permit you to take an underperforming stock in your portfolio and establish a per month income. How this option trading strategy works is as follows:Step 1. You possess a stock in your portfolio that is either flat and tend to neither increase nor decrease in your portfolio, or the stock has slipped way under the price you paid for it.Step 2. You sell a call option on this stock. Basically, for every 100 shares of the stock you possess, you can sell 1 call option linked with that stock. (Example is you possess 400 shares of XYZ stock, you can sell 4XYZ call option contract). This scenario is selling a covered call.Step 3. You recoup a premium coming from the sale of the call option. (These premiums fluctuate depending on the volatility of the stock and the period of time left on the option contract.Step 4. Now you sit by and see just what exactly the marketplace will accomplish for you. For example, the stock may decline in value and the call option will run out worthless, meaning you keep the premium and sell new call options the following month, or the stock stays flat and does not move during the month. Again you would keep the premium and write another call option against your stock. The last scenario is the stock starts to rise in value and you have to sell the stock for the strike price of the call option. Usually, if the stock you have has a high volatility, you probably wouldn’t utilize this option trading strategy. But, it is your own preference.Now, if you’re like me and need to monitor your portfolio increase in value overtime, whereas having the prospect for revenue, (which everybody reading this is likely saying no) then you need to understand all the option trading strategies that are possible for you.To provide you with an example of a good option trading strategy that you can implement at this moment is the selling of covered calls. This simple option trading strategy will permit you to take an underperforming stock in your portfolio and establish a per month income. How this option trading strategy works is as follows:Step 1. You possess a stock in your portfolio that is either flat and tend to neither increase nor decrease in your portfolio, or the stock has slipped way under the price you paid for it.Step 2. You sell a call option on this stock. Basically, for every 100 shares of the stock you possess, you can sell 1 call option linked with that stock. (Example is you possess 400 shares of XYZ stock, you can sell 4XYZ call option contract). This scenario is selling a covered call.Step 3. You recoup a premium coming from the sale of the call option. (These premiums fluctuate depending on the volatility of the stock and the period of time left on the option contract.Step 4. Now you sit by and see just what exactly the marketplace will accomplish for you. For example, the stock may decline in value and the call option will run out worthless, meaning you keep the premium and sell new call options the following month, or the stock stays flat and does not move during the month. Again you would keep the premium and write another call option against your stock. The last scenario is the stock starts to rise in value and you have to sell the stock for the strike price of the call option. Usually, if the stock you have has a high volatility, you probably wouldn’t utilize this option trading strategy. But, it is your own preference..
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Good post, I can’t say that I agree with everything that was said, but very good information overall:)