Successful tips for Options Trading – When you trade to win!

By: Boris_Dzhingarov

An option is a contract which showers the buyer with the authority but not the liability to sell an asset at a particular price on the pre-fixed date or before it. Just as a bond or stock, an option is also a security. It is nothing but a binding contract which has some stringent and definite properties and terms. Are you still confused about options trading? Well the idea behind this trading option lies clear in many of the daily situations. For instance, if you love a house and want to buy it but you don’t have the money required to do so. You then speak to the homeowner and negotiate a good deal which allows you to buy the house at $300,000 and for reaping benefit of this option; you pay an added price of $3000. This is a case similar to that options trading. Here are few points to watch out for before taking the plunge.

1. Always have a defined exit plan: As you’re an options trader, it’s vital to control your emotions. Have a plan to work and even though you get emotional while trading, don’t deviate from your plan. When we say plan your exit, we mean not only planning a way to minimize losses but also have an exit plan ready at hand. You should select your upside exit point and also your downside exit point well in advance. Don’t forget that options are usually a decaying asset and the rate of decay keeps moving faster when your expiration date comes closer. So, plan when to exit.
2. Options reduce risk: If you have the motive of gambling with such financial assets, don’t go for this as you should use options as one of the best risk-reduction investment tool. If you have an investment portfolio and you want to reduce your risk, you should invest in options trading. Don’t gamble with such vehicles as that won’t be fruitful.
3. Use Greeks options: When you deal with options, it is vital to modify and measure the risk of other stock market investment. While you calculate risks, you may use ‘The Greeks’ to quantify the risks which are associated with investment. If you calculate the delta, theta, gamma and Vega of a specific position, there will be particular risk parameters which can be easily measured. Options Greeks is therefore an effective trading strategy.
4. Sell naked options as they’re less risky: Experts say that selling naked options is way less risky than purchasing stocks. However, like stock ownership, there are some downsides too. Only if you wish to purchase shares, you should sell naked puts as that will be more efficient.

Therefore, if you’re an options trader, you may even opt for straddle option as this is also an important one that you can try for being successful in your trade. You can even get help of a professional agent who can assist you in successful options trading.

By Boris Dzhingarov

© 2016 Copyright Boris Dzhingarov - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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