Check out these 5 different tips for trading options that can be used by an option investor.
#5 It's all about reducing cost.
By selling calls against stock you own is way to implement the "covered calls" strategy. By using this strategy the overall cost of your investment can be reduced. You can even pay off any costs that were initially used to invest in the stock if enough covered calls are sold.
#4 Buy stock and get paid to do so.
Using the "selling naked puts" strategy can help you as an option investor get paid to buy stocks. Simply sell puts against a stock each month, but sell them for a lower price than the rest of stock is currently trading for. If the stock price goes up then your puts become worthless and you get to keep the money you initially invested. If the price of the stock goes down then you can sell your stock and reap in the profit when the stock bounces back up.
#3 Buy DITM options to buy stocks for half the price.
Buying into a DITM option has an important element that allows you to buy into stock for about half the price. This element is the rate of the stock and price of the option tend to stay the same. Knowing how to recognize a trend in stock can help you in buying into a DITM.
#2 It's easy to profit from volatile markets
Easy ways to profit from volatile markets are to sell credit spreads, buy straddles or strangles, and to deal with iron condors or butterflies. These strategies are best to be used when you are not certain what the stock rates are going to do.
#1 Learn how to sell options with a future.
Although deciding to sell a call or put can risk option investors a potential loss, buying another option can secure a steady profit. These profits are often seen in the 10% range per month. This "insurance" plan of always purchasing another option while selling a call or put is known as the credit spread strategy. To sell a credit spreads you should know how to recognize a trend and see where any points of support and resistance are hanging.
By George Allen