strategy for trading options

you bought. Aapl trading around 165 per share. If the share price rises above 46 before expiration, the short call option will be exercised (or "called away meaning the trader will have to deliver the stock at the option's strike price. The challenge is finding one that meets your individual needs. In return, by selling the option, the trader is agreeing to sell shares of the underlying at the option's strike price, thereby capping the trader's upside potential. Buying Puts (Long Put) This is the preferred strategy for traders who: Are bearish on a particular stock, ETF or index, but want to take on less risk than with a short-selling strategy Want to utilize leverage to take advantage of falling prices A put option works. In exchange for this risk, a covered call strategy provides limited downside protection in the form of premium received when selling the call option.

Rules Restrictions Its important you are aware of the rules for day trading options in your country and markets. There are a number of reasons you can make serious money trading options. There is no guarantee that the forecasts of implied volatility or the Greeks will be correct. If, however, the price of the underlying drops, the loss in capital will be offset by an increase in the option's price and is limited to the difference between the initial stock price and strike price plus the premium paid for the option. On the other hand, if the underlying price decreases, the traders portfolio position loses value, but this loss is largely covered by the gain from the put option position. If the market is on the decline youll sell calls or buy puts. In the past day trading options was not part of most traditional intraday strategies. Options are conditional derivative contracts that allow buyers of the contracts (option holders) to buy or sell a security at a chosen price. Multiple leg options strategies involve additional risks, and may result in complex tax treatments. Many experienced traders advise using a 1 rule. System response and access times may vary due to market conditions, system performance, and other factors. With a call option, the buyer of the contract purchases the right to buy the underlying asset in the future at a predetermined price, called exercise price or strike price.

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