|
Nowadays, many investors’ portfolios include investments such as mutual funds, stocks and bonds. But the variety of securities does not end there. Another type of security, called as option, presents a world of opportunity to sophisticated investors. Options can be as speculative or as conservative as you want. Options involve risks and are not suitable for everyone Option trading can be speculative in nature and carry substantial risk of loss. Only invest with risk capital. Options are often seen as fast moving, fast money trades. Certainly Options can be violent, they are volatile & speculative. Options and other derivative securities have made fortunes and ruined them. Options are sharp tools, and you need to know how to use them without abusing them. Free Option Tips give you the right but not obligation to buy or sell shares on strike price, before specific expiration date. The beauty of this is that you can participate in a stock’s price movement without actually holding the shares at a fraction of cost of ownership. Many traders like to use more sophisticated Option Tips strategies in their trading but many times the simple call trade is the most suitable trade for the market condition. Follow the steps below to increase your probability of profit from call option trading: • Determine that the price of underlying instrument is going up: Trading call Option is a directional strategy. This means you have to pick the direction of the market, and in order to profit the market should move up. • Determine the target price for the movement: The system that you use to indicate an upward price movement should also indicate a target price for the movement. • Look at the options chain: Bring out the options chain to see the relevant data. Nowadays real time option chains are easily available through internet. You can also call your broker to get this information. • Narrow down to the exchange and expiration date: If you trade online, determine the exchange; you want your order to be submitted. Determine the appropriate expiration date based on the time you expect the price to move. • Evaluate your risk versus rewards based on your target price: You can also use a risk profile to help you make the evaluation. • Look at the open interest and volume: It is better to trade in an active market, so that you can buy and sell easily. Another reason is that you don’t lose a lot. • Determine Exit Point and Stop Loss: Do this so that your emotions do not take over your decision making, after you place in your trade. • Place in your trade: Call your broker or key in your trade online. • Watch the underlying price movement and option’s price reaction • Close your position: If you made a profit, close your position by either selling the call options that you bought or exercise the call option and sell the shares. If you made a loss close your position by selling the call options.
Related Articles -
Option tips, Free option tips,
| 
