Option Selling – Options Trading
When you find that you are wanting to make investments many people will turn to option selling to make money and to make sure that they are safe. There are many things that you need to understand if you are going to try and take up this method of investment, they first thing that you are going to need to make sure that you understand options trading and the different ways to sell options are. There are actually many different ways that you can do this, its just a matter of making sure that you do it properly and ask any questions that you might have.
Options Trading – Option Selling
If you want to try option selling then one option that you might want to look at is that of the selling naked puts. If you sell a naked put then you are getting money up front but you are taking risk buying the stock. If you sell a stock as $40 but in drops to $37 then you are still obligated to buy it at $40. That means that you have to have the money to buy the stock and you have to be willing to hold on to equity for a while. This isn’t an options trading method that some people are comfortable with, but it can bring in some extra money if that’s what you are looking for.
If you find that the option selling method of naked puts isn’t for you then there are other techniques you can employ. One other options trading method is called the bull put spread; this is one that many people tend to prefer over naked puts. The reason is that you are not only selling a put but you are also buying another put at a lower strike price. As an example you could say that you sold the put that was $40 but you also bought one that was $35. Then you can use a portion of your profit on buying the second put but you can’t lose more than $5 as opposed to $40. This also helps because you don’t need as much cash to do this method.
Options Trading – Option Selling With Stock
The final options trading method that I will tell you about is that of covered call. When you think about option selling this method you are going to own a stock and then you will sell someone the right to purchase it from you. If you own 100 shares of stock and the stock is selling at $60 a share then you can sell the call, but then you are obligated to sell at that price in near future. But only if the buyer decides that they want to exercise their right to do so.
When you get into option selling then it’s a good idea to make sure that you do some research before you start, for many people they have no idea what they are doing and they simply give their money to someone and let make all the decisions. This can work but it’s still a good idea to make sure that you do your own research so that you know what is going on with your stock, money, and other options trading methods you might be using. This will allow you to have a more hands on approach to your money and stock. That way when you speak with your broker about what your options are you can understand a bit more about what they are telling you and you can know what options might be best for you.
So many people don’t understand and expect their broker to explain everything to them, and while many brokers don’t have a problem explain some things most of them don’t have the time to go into great detail, but there are options that you have to learn in great detail or just the basics of options trading and/or option selling. You can take classes as many colleges will offer classes or even degrees to help you understand options and how to sell them, many people will take these courses in their free time as they can be done online, and you don’t have to be in pursuit of a degree. You can also read books, and take some seminars if you find that a class isn’t what you want or that it going to take you too much time or it has too much detail for you to understand. What the best option is for you is up to how much information you want to know about the subject.
It’s a goo idea to remember that while you might not have a problem letting someone else make the decisions for you, it’s also your money and you want to have at least a basic knowledge of what’s going on and how to make the best decisions. If you don’t understand the basics of options trading and option selling then you will be relying on someone else to make all the decisions for you regarding your money.