What Are Different Option Trading Strategies That You Should Be Knowing About Right Now

If you’re scared of taking risks, rapid decisions and living on the edge, then continue with your current investment plans. But if not, then switch to trading.

Trading is for those who wish to make quick money in a short period ranging from a few hours to few weeks at most, and those who’re not scared of taking risks no matter how small or big they are. Some of the major reasons that will prompt you to start trading are-

No Unnecessary Waiting

Most investment instruments that guarantee fix returns require you to park your money for many years (as long as 25 years). But what if you want to play around with some spare cash and get a return in a few weeks or months?

Unfortunately, these don’t have any such arrangement for quick returns. That’s where trading comes into the picture. It allows you to reap maximum profit in a matter of few days.

Option trading is even faster. It enables you to make money within a few hours. Yes, you read it right. All you need to do is – play smart for a few hours and get excessive returns on your investment.

You Make Money Always

If you know how option trading works, then you may be aware of the fact that there are a lot of money making opportunities in this field. It gives you the freedom to make money even when the recession hits the economy.

Yes!

You can make money when the market performs well, and you can make money when the market doesn’t perform well. Option trading allows you to do that.

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How?

In normal stock trading, people buy stocks and wait for the market to go up so that they can sell those stock units and make some profit. When the market doesn’t go up or faces some negative growth due to any reason, they suffer huge losses. However, in the case of option trading, things work differently.

While normal trading allows you to buy stock units, wait for some time, and then sell them, option trading allows you to first sell the units and then buy them.

It may sound unrealistic, but this is how option trading works. Now imagine a scenario when the market is very fluctuating and keeps going down very frequently. In that case, if you use option trading and sell your units at a higher price and then buy them at lower prices after some time, you can make money.

Different Option Trading Strategies

Some of the major option strategies that investors from all around the globe practice on a daily basis to reap huge profits include-

  • Covered Call – It allows you to sell call options against those stock units that you already own. In return of this, you receive an option premium every time.
  • Married Put – Protective put or married put is a portfolio strategy which allows investors to buy stock units, and at the same time have enough put options to cover those units. It’s more like a hedging strategy that keeps your risk limited.

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  • Bull Call Spread – In this option strategy, traders buy call options at a special strike price and sell them at a higher price, making some quick profit in a short period.
  • Bear Put Spread – It’s just opposite to bull call spread. Traders executing this strategy buy put options and hope to generate profit when the price of underlying asset goes down.
  • Butterfly Spread – It’s a unique combination of bear and bull spread. Butterfly spread is more of a limited risk, limited profit strategy, targeting those who don’t want to take excessive risk.

So, if you’re looking forward to giving your investments a new hike, try these options trading strategies right away. Many have already done that and now it’s your turn to make a fortune for yourself.

Author: Kim Klaiman is an experienced stock analyst and financial advisor. He keeps sharing valuable tips and tricks with readers from time to time.

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