What is options trading? When you first learn about options, you find out that there are two types, calls and puts. Yet there are four basic ways you can play options and a myriad of options strategies. You can buy or sell calls, and you can buy or sell puts. Furthermore, when it comes to those basic options plays, you can buy or sell calls in or out of the money, and you can buy or sell puts in or out of the money.
Most people start out looking at options from the reference point of buying calls. If you start looking at options from all sides at once, you might get confused. They are a little difficult to understand at the beginning, though some of the concepts are easy enough to grasp. Don’t fool yourself though because you’re not playing around. If it were that easy to make money with options, everyone would be doing it. You have to get passionate about this investing niche if you are going to start trading options. A good starting point to learn is at an online resource called: Trading Review.
Just because you look at buying calls first doesn’t mean it’s suddenly time to buy them. It would be a great idea if you had a good understanding of the entire options market and how it relates back to buying and selling individual stocks before you actually got started. If you’re going to buy a call, you are going to want to know all about selling calls so that you understand both sides. If you are going to sell a put, you are going to want to know what it means to buy a put.
Remember that ultimately, you can buy or sell a call or put in and out of the money. That was simply said, but that’s 8 different ways to play options. Then you have the myriad of strategies mentioned. Have you heard of the Iron Condor? It is a popular options strategy that involves making four different options moves, and it is used to maximize gains on a stock that an investor thinks is going to sit stale and not move up or down much.
It’s hard to guess when a stock is going to sit stale, but at the same time, the Iron Condor move is set up to provide a little insurance. Furthermore, you’re going to definitely want to study stock charts and movement if you are going to be playing the options market. I have dipped my toes in the options market as an investor.
I sold some puts backed by collateral, and I wrote a few covered calls. Personally, I prefer to just buy and hold at this point and accumulate dividends, but all sides of the options market do provide a lucrative opportunity. You can buy a call and essentially control 100 shares of a company for a lot cheaper than it costs to actually buy those 100 shares. The options market is certainly interesting, and now it’s time for you to do some studying so that you can start investing.