Is It A Good Option To...
If you’re speaking to someone who calls themselves an “investor”, you are bound to hear the phrase: “Mutual Funds”. Everyone keeps talking about it, but do people really know whether...
If you’re speaking to someone who calls themselves an “investor”, you are bound to hear the phrase: “Mutual Funds”. Everyone keeps talking about it, but do people really know whether...
When you think of investments, the first thing that comes to your mind would be stocks, bonds, deposits, etc. You also think that we invest to ‘become rich in a...
Mutual Funds (MF) are trust funds managed by an Asset Management Company (AMC) with the money pooled from investors. The money is invested in assets like bonds, equities, stocks and...
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When you have just stepped on the income generation mode (say early 20s), you would have plans to set up milestones to ear mark each achievement. Purchase of a car,...
In our big wide world today, income can be generated quite easily. While most people work hard for years to ensure that they have enough savings when they retire, there...
Day Trading is a form of Share dealing where shares are bought and sold in a single day. The intention of a Day Trader is to make use of the...
Day Trading and Day Traders Traders who participate in day trading are called day traders. Day trading is speculation in securities, specifically buying and selling financial instruments within the same...
We might have heard about a lot of strategies of fund managers but it is difficult for a lay man to get a perfect picture of what it is. So...
Day Trading and Day Traders
Traders who participate in day trading are called day traders. Day trading is speculation in securities, specifically buying and selling financial instruments within the same trading day.
Different Types of Option Trading Strategies
Building Blocks
There are only two types of options – calls and puts. Calls and Puts form the basic building blocks of all variations of option trading. One option unit is equivalent to 100 units of the underlying stock.
Every trade is built using only calls, only puts, or a combination of the two. Every call or put must have a seller and a buyer.
If You Are SELLING Options
You absolutely must understand the concept of Time Value and Time Decay. Knowing about Volatility (in general) helps because high volatility stocks give better option premiums and therefore better profits (and slightly higher risk).
Focus on four types of option selling:
If you are BUYING options:
Buying Calls and Puts is a wonderful way of making huge profits with small amounts of money. It is to watch a trade double…then triple…and sometimes even quadruple….all within a few days or even hours.
The Advantages of Buying Options
When buying options, you make full use of leverage to capitalise on a move in a stock. Instead of purchasing the stock for a large amount of money, you can acquire the rights to the same amount stock for a fraction of the cost.
The profit potential for options is unlimited.The loss potential is limited only to the amount of money that you put into a particular trade.
You need to understand FOUR important terms, namely:
The price of any option (call or put) has two components:
Understanding these basic terms and their relation to your options is important for you to make a profit in your day trading.
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