2 Quick And Easy Options Trading Strategies For Beginners

By Dale K Poyser

 Ever wanted to get into options investing but did not know how? Well, I’m going to give you a quick overview of options and then two options investing strategies that are quick and easy to implement.

Overview on options

The first thing to understand is that Options trading can be very speculative or very conservative, how much is entirely up to you. In other words, you can do everything from protecting a position from a decline to outright speculating on the movement of a stock, commodity, or index, this is the conservative approach. The high risk associated with options applies to the speculative approach. You can buy and sell options like you buy and sell stocks. Statistics show that 80% of Options “sellers” make money and 80% of options “buyers” lose money. So, which side do you think you should be on? That’s right, the sellers!

An option is a binding contract (between a buyer and a seller) that gives the buyer the right, but not the obligation, to buy or sell a fixed amount of shares of an underlying asset at a specific price on or before the expiration date. For stock options the expiration date is usually the third Friday of every month, although there are some stocks that have options that expire weekly, Microsoft and Google are examples of stocks with weekly expiring options.

A call option gives the holder the "option" to buy the underlying stock at a specific price (strike price) before expiration. Calls are like being in a long position on a stock. Call buyers profit if the stock will increase significantly above the strike price before the option expiration date, otherwise the option expires worthless.

A put option gives the holder the "option" to sell the underlying stock at a specific price (strike price) before expiration. Puts are like being in a short position on a stock. Put buyers profit if the price of the stock falls significantly below the strike price before the option expires, otherwise the option expires worthless.

2 Quick and Easy Options Trading Strategies you can Implement today!!

The two options strategies I recommend for beginners are

1. Selling naked puts on stocks you would not mind owning, or
2. Selling covered calls on stocks you already own.

By selling naked puts you are basically being paid a premium upfront to buy a stock at a price YOU determine. If at expiration the stock never hits the price (strike price) of the option, you keep the premium free of any further obligation. At this point you are free to sell the put option for the next month out. You can do this strategy over and over again until you are forced to take ownership of the stock. At which point (you now own the stock) you can sell covered calls until someone buys the stock from you.

These easy options investing strategies are a great and very simple residual strategy that can easily make you 10% or more on your money every month. A key to these strategies are choosing the right underlying stocks and strike price of the options. This works best with non-volatile stocks.


Article Source: http://www.streetarticles.com/retirement-planning/2-quick-and-easy-options-trading-strategies-for-beginners