Options Trading Advice
I've been investing for a long time, and more recently I've had some great success in the world of stock options. While they're risky, they can also be an extremely rewarding means of making money if they're handled right.
If you're new to the trading world, or even experienced but find yourself struggling, I'd like to give you a few pieces of advice that I think will help you out in your quest to become a great trader. Follow these tips and you'll be in better shape when it comes to trading options.
You may or may not be aware of the fact that options lose value over time. This is known as time decay, and it basically means that the longer it is until an options contract expires, the higher of a price it will sell at relative to nearer contracts at the same strike price.
Let's say you buy a contract for December while we're in the month of April. The stock price is at $13, and the strike price on the contract is $16. Clearly, there's a higher percentage chance that this stock will break $16 between now and December than there is between now and May. As a result, contracts with an expiration date that's further out will sell at a higher price.
Many smart traders also like to hedge their risk by doing things like straddles, or buying puts on their calls and the opposite as well.
A patient and wise investor will generally do this for the protection and the piece of mind.
Sure, you might not make as much money as you otherwise would have, but investing something like 5 or 10% in the opposite outcome can ensure that you lose much less than all of your investment should your option never hit its strike price.
Follow this advice and you'll be in a much better position than most. - 23305
If you're new to the trading world, or even experienced but find yourself struggling, I'd like to give you a few pieces of advice that I think will help you out in your quest to become a great trader. Follow these tips and you'll be in better shape when it comes to trading options.
You may or may not be aware of the fact that options lose value over time. This is known as time decay, and it basically means that the longer it is until an options contract expires, the higher of a price it will sell at relative to nearer contracts at the same strike price.
Let's say you buy a contract for December while we're in the month of April. The stock price is at $13, and the strike price on the contract is $16. Clearly, there's a higher percentage chance that this stock will break $16 between now and December than there is between now and May. As a result, contracts with an expiration date that's further out will sell at a higher price.
Many smart traders also like to hedge their risk by doing things like straddles, or buying puts on their calls and the opposite as well.
A patient and wise investor will generally do this for the protection and the piece of mind.
Sure, you might not make as much money as you otherwise would have, but investing something like 5 or 10% in the opposite outcome can ensure that you lose much less than all of your investment should your option never hit its strike price.
Follow this advice and you'll be in a much better position than most. - 23305
About the Author:
For more articles by this author, read his blog about cheap worldwide travel insurance reviews deals policies and single trip holiday insurance policies.
posted by Mr. Forex at
7:10 AM
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home