Online Option Stock Trading – 4 Tips To Keep You From Losing Your Shirt
Online option stock trading is one of the most lucrative ways to make money using the stock markets, but only if you know EXACTLY what you are doing. The thing about options trading is that you can make money whether the stocks rise or fall, if you do it right. Check out these tips to find out exactly how to get into online option stock trading, and make some money.
Learn exactly how online option stock trading works. It can be tricky to get to grips with at first. Basically, if you buy an Option on a stock, you are buying the option to buy or sell it at a predetermined price, depending on which of the 2 kinds of options you buy. The 2 types are called Calls and Puts, and buying a Call means you have the right to buy a certain stock at a certain price, within a specific period. This is useful if the stock price is rising, as you can then exercise the option to buy at a lower price, and immediately sell for the higher price. A Put is the opposite way around, giving you the option to sell at a certain price within a certain period. This is good if the stock price is decreasing, as you can buy at the lower price and then exercise the Put to sell at a higher one.
Use your options to hedge your bets. This is a legitimate strategy as employed by professional traders. When you get familiar with online option stock trading, you will come to realise that one of the best uses of an option is to buy some regular stock which you believe will rise, and then at the same time hedge that bet by buying a Put option alongside it, so that if your predictions prove inaccurate you can exercise your right and sell the stock using the Put option, and vastly reduce any losses.
Learn to trade only the options positions. Within the world of online option stock trading, it’s widely believed that trading the options themselves can be more profitable than purchasing the options and actually using them. The prices of options will rise and fall along with the actual stock price, but as there is an inherent time factor, you can usually utilize this to maximise the prices of options you wish to sell.
Lastly, one of the most profitable ways to use options, is to purchase some Puts in a stock which is almost definitely going to fall. In the world of online option stock trading, if you were to purchase a Put in a certain stock after the company announces some poor financial results, your Put will soon be rising in value as the company’s stock price falls. This is because owning the Put locks in your right to sell the stock at a particular price, regardless of how much the actual stock price falls in this time.
As you’ve seen, online stock option trading can be tricky, but it’s very profitable if you know what to do. Click the links below to see how you can automate your trades with special software.