An option can be defined as “a contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset (a stock or index) at a specific price on or before a certain date.”
It is a derivative, which gets its value from an underlying asset.
Stock options get their value from stocks while index options derive from the index or equity.
Options have expiration dates unlike stocks and there are no fixed numbers.
There are two types of options: call and put.
What are Options Trading Strategies?
The strategies can be categorized as follows:
What is a long Call Option?
Long Call Option is used when an investor feels bullish regarding the market and expects the price value of a particular stock or index to rise up.
What is a Short Call Option?
A Short Call Option is contrast to a Long Call Option. A Short Call Option is used when an investor is bearish and sense that the stock or index price is about to decline.
What is a Long-Put Option?
A Long-Put Optionis preferred when an investor is bearish but anticipates the stock or index to rise.
What is a Short Put Option?
A Short Put Option is preferred when the investor is bullish but anticipates the stock or index to fall.
What is a Short Straddle?
A Short Straddle strategy can be used when the investor senses the stock is not very volatile and tries to make the option premium on two contracts.
What is a Long Straddle?
A Long Straddle strategy is preferred and used when it is believed that the stock is very volatile but the direction of the move is unpredictable.
What are the guidelines while using Options Trading Strategies?
A deviation is binary options trading where traders lay their bets based on whether or not they think that a certain underlying asset will rise above a certain price at a certain time.
The strategies can be put into function individually or in a variety of combinations in order to obtain success.
Exiting the trade at the appropriate time is very crucial.
Using of Stock Options tips from trusted sources.
Utilizing of tools such as option calculator will be useful in the process of trading.