There are plenty of ways to make many trading stocks and securities in today's market. Unfortunately, there are probably more ways to lose that same money by not using sound trading strategies. One opportunity that can be used in place of stocks is through online options trading.
The risks to online options trading are greater than those of buying and selling single stocks. However, the opportunity to increase your return on an investment exponentially is too large to ignore. Here are 3 basic online options trading strategies that are used by experts today.
- Covered Call - One of the safest online options trading methodologies used today, selling covered calls against stocks that are in your portfolio can provide you with income every month. In order to successfully sell a covered call, you must first hold 100 shares of the underlying stock so that you can turn it over to the buyer of the contract if it is called. This is where the term "covered" comes from. If you are interested in learning more about covered calls, check out How to Sell Covered Call Options.
- In the Money Calls - Is there a stock that you like that has been beaten down lately because of other factors not directly associated with the company? Maybe you want to invest in this stock but don't have the funds to buy enough of the shares to make a difference? If this sounds like your situation, then maybe you should consider buying in the money calls. The term "in the money" means that you purchase a call(s) for the underlying security that is several strike prices below the current share price of the stock that is several months into the future. This strategy allows you to profit from any upswings in the stock but at a much greater return.
- In the Money Puts - Just like you were bullish on a stock, maybe there is a time when you are very bearish on a company. Instead of purchasing calls, you do the complete opposite and purchase puts that are deep in the money to profit if they security starts to drop. The downside to this strategy is that you may lost your initial investment if the security increases and comes "out of the money".
The online options trading strategies listed above are some of the more popular methodologies for generating income from calls and puts. Before you start trading any kind of options or stocks, be sure to do your due diligence. The stock market feeds on the uneducated and more experienced investors will take your money right from underneath you if you let them.