Option Strategies You Should Master
For a trader considering venturing into trading options, there are options strategies you should know to ensure you are maximizing the returns on your investment. Trading options, like any other investment comes with its challenges that can lead to massive loss of revenue, which is why as a trader, you should learn the option strategies available to you. There is a lot you can gain from stock options but the key lies in learning and understanding the option strategies available to you. Below are the ten option strategies every investor should know before jumping into trading options.
Covered call is the first option strategy you should know about; for an investor who is not looking to stay alone on the stock for long, this is the perfect strategy because it also generates income while reducing the risks you face. As an investor looking to maximize the return when trading options, Married Put is one of the option strategies you should know; this involves buying both shares and outs of an equivalent number to protect yourself in case price falls sharply.
If you are expecting the price of assets to increase moderately, this is the perfect strategy to use to ensure you are getting the most when trading; you buy calls at a specific strike price and then later them for a higher price, resulting in profits. Unlike the Bull Call Speed strategy, the Bear Put Spread is normally used when an investor is expecting asset prices to decline which is why you should master it, but instead of buying calls, you are buying puts at a specific price and selling for lower strike price.
As a potential trading options investor long straddle is one of the most important strategies you should familiarize yourself with because it opens up the possibility of unlimited gains as well as significant losses too. Long strange is an option strategy that will be valuable in those times when you don’t know whether an asset price is will shift to the positive or negative side.
Iron Corridor is usually the most frequent used options strategies because it is known to have a high probability of earning a small amount of premium and is especially important if you are dealing with a sock experiencing low volatility. With the Iron Butterfly strategy, profits and losses are both limited within a specific range but you can generate income and a higher probability of a small gain with non-volatile stock. These are the options strategies you should know of.