Option Strategies You Should Master
Like every other investment, a person looking to jump into trading options is looking to make profits and limit risks which is only possible if your familiarize yourself with the options strategies as your disposal. When you take the time to learn about them, you will realize there are so many you can use to your advantage to maximize returns and limit the risks you usually face. Before making trading options your next investment, you should ensure you have everything you need to get the most out of it, hence understanding option strategies. As and investor, you should know the following option strategies.
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. Married Put which is perfect for protecting downside risk when holding a stock is another strategy you should know about; this strategy is meant to protect you in case the price of stock falls sharply which can be any time.
Any investor should learn about the Bull Call Speed because it will come in handy when they venturing into trading options; this can be yours simplest way of generating income because like with other businesses, you buy at a specific price and sell the same number of calls at a higher price. 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.
A long saddle options strategy will occur if you decide to buy both call and put options on the same underlying asset with the same strike price but you believe the price will change significantly, you just cannot tell in which direction, opening up a chance of unlimited gains as well as significant losses. As a prospective investor in the trading of options, you should know that strangles are usually more affordable compared to straddles but is beneficial if you cannot tell the direction the change massive change you are expecting will take.
As a trading options investor iron corridor options strategy is one of the things you should master because there is always the potential that you will earn a small amount of premium. In case you find yourself dealing with a non-volatile stock, Iron Butterfly strategy can come to your aid; you will earn income with this strategy, plus a possibility of a small gain. Ensure you have mastered these option strategies before jumping into trading options.