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

Binary Options - Getting Comfortable With Derivatives

By orcun

 Every day we see and easily understand real-life derivative relationships all around us. Once you get the hang of it you will see that most financial derivatives are not so difficult to grasp. While the mathematics might be daunting at first, merely getting an intuitive feel for the purpose and function of an individual derivative isn’t tough at all.

Let’s talk about the derivative relationship between parents and their children for a bit. We often see a child that looks like a dead ringer for one of its parents. We might be slightly taken aback at the amazing likeness, but this is, nonetheless, a familiar situation for us. Sometimes members of a large family look like differently scaled versions of each other. And we have all see the schoolmaster who projects past experiences for the new arrival: ‘‘Young Smith, I pray you don’t give me as much grief as your brother did!’’ Likewise, we are familiar with the fundamental adage that children are derivatives of their parents: ‘‘The apple doesn’t fall far from the tree.’’ Derivatives in financial markets also follow paths and values similar to those taken by their parents.

Financial derivatives such as options, futures, forwards, and swaps inherit their value directly from their parents. In fact, a financial derivative would not have a price at all if the parent ceased to exist (stopped trading). The parents are the three basic financial groups that we are already quite familiar with: stocks, bonds, and commodities.

Every day more and more derivative products are being churned out by inventive marketing departments. These ‘‘innovations,’’ however, are merely variations on the theme of the most important fundamental derivatives: binary options, forwards, and futures. These three derivatives are the three basic building blocks of all complex derivatives, such as swaps.

In a sense we will become financial investigators, delving into the whys and wherefores of the basic three derivatives. As such there is a lot of math involved, but it need not be painful. We will assume the reader has little background in math. We will follow the most intuitive paths possible and avoid as much complexity as we can. Binary options are far more complex in comparison to forwards and futures, both in the math needed to analyze them and in their implications. As such we will spend almost all our time discussing and analyzing options.

Binary options will definitely help you. In order to understand binary options better, read this article once more.

Article Source: http://www.streetarticles.com/day-trading/binary-options-getting-comfortable-with-derivatives