All multimillionaires in the stock market must be able to profit regardless of market conditions. If you are only able to profit when stock markets rise, it will be extremely difficult for you to achieve consistent success, let alone become a stock market billionaire.
Yes! Option trading makes it conceivable and simple to benefit whether stock prices are rising, falling, or remaining stable. If the capacity to trade in all market conditions is the key to becoming a millionaire in the stock market, then option trading is the key.
In this essay, I will describe some of the most typical strategies to benefit from all types of markets through option trading. You may like to check www.OptionTradingPedia.com for additional free information on option trading. Simple Option Techniques for Rising Markets Purchase Call Option Using call options, you might purchase the same amount of identical stocks for a fraction of the cost and benefit when the stock price rises. If the stock crashes, you will lose only the modest amount you spent on the option, as opposed to the entire amount you would have spent on the stock itself.
Sell Naked Put Option – Rather than purchasing call options, you might sell short put options, pocketing the whole profit from selling the put options if the underlying asset rises. A bull call spread consists of purchasing at-the-money call options and selling out-of-the-money call options of the same month. The advantage of this method is that you profit both when the stock goes up and when it stays flat!
Straight forward Option Strategies for Down Markets
Rather than shorting shares and risking a margin call, you may just purchase a put option. Purchasing a put option is identical to purchasing a call option, except that you profit when the stock declines instead of rises. Sell Naked Call Option – Instead of purchasing put options, you might sell naked call options, pocketing the entire profit from selling put options should the underlying stock decline.
Bear Put Spread – A bear put spread involves purchasing at-the-money put options and selling out-of-the-money put options for the same month. The advantage of this method is that you profit both when the stock goes down and when it stays flat!
Simple Option Strategies for Rising and Falling Markets
Straddle – A straddle consists of purchasing a call option and a put option on the same stock at the same strike price. This technique allows you to profit regardless of whether the company moves up or down and is ideal when you are confident that a stock will move significantly in the near future but are uncertain in which direction. Strangle – Similar to a straddle, but the trader purchases out-of-the-money call and put options instead of in-the-money ones to minimize the cost of the position.
Covered Call – Simple Option Strategies for Sideways Markets If you are holding a stock that is moving sideways, you may collect “rent” by selling the call option of that stock month after month. If the stock continues to move sideways, you would pocket the entire sale price.
Short Straddle – Instead of purchasing call and put options as indicated in the description of a Straddle, you would sell them short. Thus, you build an option strategy that profits when the underlying stock remains unchanged.
Are you astounded by how simple it is to profit in any market circumstance through option trading? These are but a handful of the numerous additional option trading tactics that can be applied to your portfolio. Please visit www.OptionTradingPedia.com to learn more about option trading and stock options for free.