Showing posts with label Options strategies. Show all posts
Showing posts with label Options strategies. Show all posts

Sunday, November 3, 2013

5 Tips For Trading Stock Options

New York - "GREED STREET or Wall Street.....
You're ready for the exciting world of stock options, but you need some strategies to check out. Thankfully, the Internet is full of advice from traders. Unfortunately, not all of that advice is sound. Some traders are merely mimicking what they've seen other traders do. 
Others are newbies themselves. Still others are offering advice while secretly trying to sell you their proprietary software. While trading in stock options is an advanced strategy, you don't have to over-complicate things. Find yourself a good broker using a site like BrokerStance. Then, start with some basic strategies. 

The Covered Call

A covered call is a basic options strategy. Also called a "buy-write strategy," you purchase the underlying assets outright. Then, you simultaneously write or sell an option on those same assets. So, for example, if you wanted to buy 1,000 shares of General Electric, you would also write the option on GE. The volume of assets (the number of shares) should be equal to the number of shares controlled by the option. 

So, continuing the example, if you had purchased 1,000 shares of GE, you would also want to make sure the option allowed you to sell 1,000 shares of GE. Investors often use this strategy when they have a short-term position and a neutral view of the stock they're buying. You would use this strategy to generate income from the call premium (from writing the option). You would also use this strategy to protect yourself from a potential decline in the underlying stock's asset value. 

Since investors always make money with this strategy, they're attracted to it. However, it is possible to under perform the underlying stock, making it a less profitable strategy than, say, investing directly in the stock and forgetting the option contract. 

The Married Pull

A married pull is where an investor buys or owns a particular stock, and then simultaneously buys a put option for an equivalent number of shares in that stock. Typically, this strategy is used when you believe the underlying stock will decline in value and you want to protect yourself from short-term losses. It basically creates a sort of insurance policy against losses by establishing a "floor" on losses. 

This is a more conservative strategy and depends on you being bearish on the underlying asset. You are taking a defensive stance in your portfolio. The goal isn't necessarily to make money but to avoid losses. 

A Protective Collar

A protective collar strategy is used when you've already made a lot of money and you want to preserve your gains. To pull this off, you need to purchase out-of-the-money put options on the underlying asset and write an out-of-the-money call option at the same time. The effect? Even if your shares decline in price, the put options protect you and you get to keep the gains you've earned. 

Like the married pull, this is a more defensive strategy. You've already done the hard work of figuring out which stocks to buy, and you've made money. You just want to keep from losing it if the stock turns sour quickly. It buys you some time to get out of the asset if execution is slow (i.e. if the stock is thinly traded) or if you think there's new news about the company that will cause an immediate, short-term, reversal on the price. 

A Long Straddle

The long straddle is used when you want the potential for unlimited gains but want to limit your losses to the cost of the options contracts. To implement this strategy, you must purchase a call and a put option with the same strike price. The option is on the same underlying asset. So, in effect, you are "straddling" both sides of the stock. You have the right to both buy and sell that underlying asset. This strategy works best when you think the underlying asset is volatile and will move, but you're not sure which way it will move. 

A Long Strangle

By adopting a long strangle (as opposed to a long straddle), you are essentially trying to do the same thing as with the straddle, but you're buying the options contracts at different strike prices and you're also buying them out-of-the-money (meaning that they're not immediately profitable when you buy them). 

The call option strike price is typically higher than the put option strike price. Use this strategy when you think the underlying stock will make a huge move, but you're unsure of which way it will move. Like the straddle, losses are limited to the cost of the contracts. The upside potential is unlimited. 

Jarryd Harden enjoys sharing his know how on trading stock options. His articles mainly appear on investment blogs.

Tuesday, July 30, 2013

How To Keep Your Investment In Sight

The stock market is one of the best ways to invest your money. This is because they have higher returns as compared to investments in real estate or bonds. However, before you benefit from your investments in stocks, you need to find ways to manage this type of personal finance. There are several tools on the market that you can use for managing your investments. This article looks at some of these finance tools.

Virtual Options Trading Tool

There are so many strategies that you can put in place to achieve the goals you have set for your investment in stocks. This tool allows you to test any new strategy before implementing it. This tool gives you access to various strategies to help you process complex orders. The best thing is that the tool is totally free for you to use.

This finance tool comes with virtual options, trade stocks, spreads, covered call trades and straddles. You also have access to advanced order strategies such as one-cancels-other (OCO) and triggers. Other features include:

  • Analysis of performance via downloads of positions
  • Use the notes feature to set reminders for various tasks
  • In case you need to start all over again, you can reset the account and have a fresh start

Stock Screening Tools

This represents one of the most versatile tools that you can use in your stock investment. This tool can pinpoint credible companies in a particular industry. You will be able to examine valuation ratios, revenue growth, and various types of financial ratios. These tools allow you to maintain a proper balance in your investment portfolio.

Screening tools come with a charting capability that allows you to determine the buying and selling levels. This helps you enjoy better accuracy as well as saving time for you. You will get to understand the various concepts underlying different types of stocks. 

Stock Monitoring Tools

If you need to watch your investment grow, you must have a tool to monitor the portfolio you have set up in a quick and efficient manner. There are various tools that you can use to do this. One of the best feature of such tools is the capability to give you updates in real-time. The updates may come via email or phone. The updates will help you assess your portfolio very quickly and based on facts.

Most of the tools come with a news feed. This works by giving regular news for specific stocks. The information will come from various sources such as blogs, websites and other sources. The information you get will be the latest on the market.

Stock Prediction Tools

Predicting the way the market goes is not a guarantee. However, there are tools that will give you an idea of what to expect. These finance tools for prediction use pattern analysis to determine what will happen next. You can use the resulting chart to know how the stocks will rise or fluctuate so that you can make an educated decision. Stock prediction tools are ideal for deciding which type of stocks to invest in. 

Stock Growth Analysis

If you have invested in a given type of stock, you need to find a way to know whether it is increasing or not. This will help you know whether to purchase more stocks, keep the one you have or invest in a new type of stock. These tools monitor any change in the stock so that you know exactly when something happens.

Finance tools for managing your stock help you stay on track with your investments. You will be able to know how your investment is working out and which step to take regarding your stocks.

Author Bio
Joshua Turner is a writer who creates informative articles in relation to business. In this article, he offer tools to manage finances and aims to encourage further study with an  NJIT Online Master Computer Science

Wednesday, February 27, 2013

Various Types of Binary Options

Binary options are meant for investors throughout the globe for trading. This is because only binary options trading can provide high return. Also binary trading involves low risk, with easy concepts and can be done easily, and hence attract more attention. Not only are the new traders, even the experienced traders too interested in binary trading.

The only thing that any trader taking up binary option trading should take care of is the expiry time. No matter whether the trader has opted for long term or short-term trade, this is the best thing to do. The expiry time vary from few minutes to many days. Also there are various assets available and these assets are stocks, currency pairs, commodities and indices.

The binary options which are known as digital options are excellent for those who want to earn dual benefits both by manual as well as internet trading. It is not at all tough to earn money through binary trading. The only thing the traders have to do is to do the estimation about the movement of the option and then take a decision. If the decision is correct then the trader earns good returns. However, a wrong decision would not give any financial benefit though the loss would be insignificant. There are two types of possibilities in binary trading options, one is “in the money” where the trader earns good amount of money and the other one is “out of the money” where the trader gets no financial rewards.

Here are the types of binary options available in the market. These are:

  • Above/Below: This option is also known as High/Low and it is the most popular among the binary options. In this type of binary trading, the trader has to provide the estimation of the rise and fall of the value of an asset. There are two options ready for purchase in this type of binary trade. The call option is for those traders, who estimate that the price of the asset would be higher than the strike price. The ‘put’ option is for those traders who estimate the value of the assets to be lower than the strike price.
  • Boundary or Range option: In this option the trader has to estimate whether the price of a particular asset would be within a specified range when the expiry time approaches. There are various types of values that are given and the traders have to estimate whether the price of the assets are within that range. If the trader choose the “In” option, that means that the trader would estimate that the price of the asset would be within the range of upper and lower value specified. If the trader chooses the “Out” option, it will mean that the asset price would be outside the specified value range.
  • Touch: In this binary option, if the trader chooses the “Touch” option, then that means that the trader is estimating that the price of the asset will reach the strike price by the expiry day. If the “No Touch” option is selected, then the price of the asset would not reach the strike price according to the estimation of the trader.

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