Option contracts are often entered into by traders in order to reduce their risk. You can use many different options strategies. Trader must be able to identify the best market for them and determine which strategy is most effective. A strategy can be implemented by combining several options positions. Option trading tips and financial advising services can also help you to earn good returns. Option contracts can generate high returns while reducing risk compared to traditional stock trading.
Below are some options that are highly preferred and most helpful in generating high returns.
1)Covered call writing
This strategy requires a trader to sell a call option, in which he gives the right to purchase stock he already owns at a predetermined price. This option is available for purchase by paying a premium. This strategy works in all market types, including bullish, bearish, and range bound. This strategy is most effective in a slightly bullish market. Profit will be earned if the share price rises above the strike and contract in exercised prime amount.
2)Protective Collar
Protective collar strategies involve holding shares of the underlying security, buying protective puts, and then selling put options to buy protection against further holding. Both the put and the call option have equal number of contracts, and they both have the same expiration date. This strategy allows traders to avoid sudden price falls of the underlying security.
3)Bull Call Spread
This strategy is simple and traders love it. A trader must simultaneously purchase a call option at a low strike price and then sell the same amount at a higher strike price. This strategy is for traders who want maximum profit. It works when the strike price for the call option is sold rises above that of the underlying security.
4)Iron Condor
This strategy can be difficult to grasp for beginners. Iron condor is a combination of bull call spread and bull put spread. This strategy can be used to generate high returns even if the price of the underlying security moves little.
These strategies are the most widely used by traders and are able to generate high returns while taking minimal risk. Stock futures tips can be used to improve performance in the future market. These stock futures tips were developed by market analysts who have done quality research. No matter what trading strategy a trader uses, a thorough knowledge of it is essential.