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Options trading conservative investor

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options trading conservative investor

Conservative Options Trading For Individual Investors. This page was created to give prospective members a better feel for the option trades we make. What strategy we choose depends on what the market is doing. If the market is flat and not moving much we do certain types of trades more, and if the market is flying in one direction either up or down, we concentrate more on other types of trades. High volatility is great because it raises the prices of all options. As sellers, this means options are pricier and the seller gets paid more when he sells them than under options conditions. But high volatility can also hurt us because the market can move quickly. The credit spread is one of our favorite option strategies. This is a trade which results in a credit money given to you at the beginning trading the trade. It consists of two different options legs. You buy an out of the money option at a certain investor price and then you sell an out of the money option at a different strike price of the same month. You get a credit of 50 cents. As time goes on the options will decay in value. Difference in strikes minus the credit: Buying the second option does two things: It allows you to do the trade with less margin. So even though you have to pay for the second option, it is a conservative strategy to employ it. Which option strike you decide to sell depends on how aggressive you want to be. Our style is conservative so we choose options that have a very low probability of expiring with any value. If you use this strategy with At the Money or In the Money options you can make a lot more money, but have a higher risk of loss. An Iron Condor is simply two credit spreads, calls and puts, used together. This way you get a larger credit. Most stocks stay within a range. And using statistics we can tell with a high degree of confidence exactly what that range will be. We then sell options above and below this range. As long as the stock stays in the range, we win. If the stock threatens to break our range, we have to adjust our range by adjusting conservative trade to account for the movement. If you subscribe to my Free Options Course, I will show you exactly how we put on an Iron Condor trade, a real trade that we did, and the adjustments that we made to the trade when it got into trouble. For more details click here: The butterfly is a neutral position that is a combination of a bull spread and a bear spread. As you can see our breakeven points are 53 and As long as Options stays between those strikes the trade will be a winner. While the covered call is considered a conservative option strategy it can be very risky. Basically you buy shares of stock and you write a call against that stock. So for example, you buy shares of ABC at and you sell the Call for 2. At expiration if ABC is aboveyour call will be exercised and they will investor your shares. But you get to keep the 2. Writing calls against stock you already own and want to keep long term is a neat way to make some extra trading for holding the stock. Where you can get into trouble is when the stock drops in price. If you want to hold it, do so. But if you were in for a quick trade, you are in trouble. If that is a risk, you can do a covered call that is already in the money. So buy ABC at and sell the 90 Call. We do not use this technique much. But it comes in handy in times of very high volatility. When volatility is high, options are more expensive and so the premiums we get by selling options are larger than normal. We trading use covered calls to take advantage of this volatility. C Buy shares at 7. I chose to illustrate options trade with shares, but members are free to trade as much or as little as they want. Notice that we sold In the Money Calls. That is a 6. If you use margin the return is On expiration day C was at 7. Our stock got called away and we made the max on the trade. Time Spread is a spread that is a relatively cheap trade but has a conservative profit potential. It is created by selling one option and buying a more distant option with the same strike price. When we use it as a neutral trade, we benefit from the time decay because the near term option will decay and lose value faster than the farther out option conservative we bought. When enough decay has occurred we exit the trade. Check out this link for more on Calendar Spreads. A Double Diagonal is two diagonals, Puts and Conservative put together. The diagonal spread is created by buying a longer term call at a higher strike price and selling a near term call at a lower strike price. So if ABC was atwe would sell the January Call and Buy the February Call. Trading this case we want ABC to stay below at expiration in January. To make it a Double, you do the same on the Put side. So we would sell the January 90 Put and buy the February 80 Put. This gives us a range of that ABC can play in. If it stays in that range we make our max profit. If it gets out, we need to make adjustments. The Double Diagonal is a good trade because with adjustments you can still win even if the stock goes well out of the range. Skip links Skip to primary navigation Skip to content Skip to options sidebar OptionGenius. Header Right Log In. About Us Become a Member Questions? Strategies My Mission Autotrade Blog Contact Us. Option Trading Strategies This page was created to give prospective members a better feel for the option trades we make. Here are the option trading strategies we use and a short description of them. Credit Spread Option Trading Strategy The credit spread is one of our favorite option strategies. You can also do credit spreads with Put investor if you think a stock is going up. Iron Condor Option Trading Strategy Another of our favorite option strategies is the Iron Condor. Iron Condors Butterfly Spread Option Trading Strategy The butterfly investor a neutral position that is a combination of a bull spread and a bear spread. Results of butterfly spread at expiration Price at Expiration July 50 Profit July 60 Profit July 70 profit Total Profit 40 50 53 0 56 60 64 67 0 70 80 As you can see our breakeven points are 53 and Covered Call Option Trading Strategy While the covered call is considered a conservative option strategy it can be very risky. Calendar Spread Option Trading Strategy The Calendar AKA: The risk in a Calendar is the debit required to put on the trade. Check out this link for more on Calendar Spreads Double Diagonal Option Trading Strategy A Double Diagonal is two diagonals, Puts and Calls put together. options trading conservative investor

4 thoughts on “Options trading conservative investor”

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