Is Options Strategy The Best Stock Trading Strategy In The Market Today?
Being an options trader can have its advantages and disadvantages. In fact, there are different types of options strategy available that it would take one a couple of tries to find the perfect options strategy to implement in their investment practice. Plenty of traders suggest one options strategy such as covered calls whereas some offer to use the straddle. In truth however, the type of options strategy that one would use depends on his or her risk appetite as well as how high or low the profit or earnings they want to achieve. Is Options Strategy for You? Many think of options strategy as the best one yet. However, as mentioned above, options strategy includes several strategies. One might work well for your fellow trader but not necessarily for you. In order to turn options strategy into a trader’s best-kept weapon, one should know the strengths and weaknesses of each options strategy. This is important, as one would be able to utilize fully the stock trading strategy to their advantage. By knowing the strengths and weaknesses of the options strategy, one would be able to understand the risks and the possible earnings that one might incur from using a particular strategy. One of the best ways that a trader can check for the options strategy that would work for them would be to look at charts and diagrams of the strategy that they are attempting to use. Plenty of brokerages do offer a testing platform where traders would be able to test their financial strategies. By simulating their strategies, traders would be able to get a glimpse of the future of the option. This can help if one is unsure whether to make a long-term commitment or a shorter one. Which Options Strategy Would Work? There are different options strategies that novice traders might want to look at before they implement them in their work. The following are just a brief overview of some of the options strategies available. Spread Strategy - Spread strategy is when a trader buys two or more options of the same kind and taking up a position such as bullish, bearish, box, butterfly and calendar spread. Combination Strategy - Combination strategy is another type of options strategy but is different from Spread Strategy as it makes use of a variety of call and put options. Types of options strategy under the Combination would include the straddle, strip and strap, and strangle.
Covered Strategy - Covered strategy is one of the more favourable options strategies as the strategy involves the trader taking up a position in the option and the underlying stock. Strategies under the Covered Strategy include covered call, covered put and protective put. Covered calls are ideal for those traders who have a bullish outlook in the market, as the risk is limited although a bit substantial. For those who are starting out in the stock market arena, the best type of options strategy to use would be the ‘bull and bear spread’ or what veteran traders call “vertical spread”. The two-optional strategy would help beginners start their investment portfolio while at the same time, traders would be able to quantify their losses or profit as the case maybe.