Options Trading Strategies for New Traders

Options Trading Strategies for New Traders

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New options traders need to learn a lot before they start to trade.  And knowing the options trading strategies that they are going to put in use is one of the basic knowledge they must have.

Here are the strategies for options traders that involved limited risk as well as easy to understand.

Options Trading Strategies – Basic

These strategies are commonly used by novice investors who just start trading in the options trading

Covered Call Strategy

This is a strategy that many investors use when they just start to play in options trading. The main idea of this strategy is that an investor that usually already owns shares or just buys a new one, will sell someone else a call option.

This action allows the buyer to buy the stock at a specific price. The investor gets a premium from selling the call. And in case of the options called away, the investor is already covered.

Basic Spread Strategy

This is one of the options trading strategies that many novices in this area love to try. This strategy has limited risk and also limited profit, where the investor put two calls to get a net debit or credit.

There are basically two types of basic spread, the credit spread and debit spread. In the credit spread, the trader sells a spread and in turn collects a credit. On the other hand, a debit spread is when the traders buy a spread and pay a debit for that.

Options Trading Strategies – Advanced

These strategies are usually used by investors who have been trading in options trading for some time

Cash Secured Puts Strategy

This strategy involves the sold put options on the stock that people want to have by choosing a specific strike price. And the one where people are willing to pay. Or the one that goes below the current stock price.

A trader will get cash premiums when they are agreeing to buy specific stock by paying the strike price. The trader himself may or may not buy the stock. But they can keep the premium cash as a prize for them.

Collar Strategy

This strategy is pretty similar to the covered call strategy. In this case, the investor who already owns shares will sell someone else a call option, with the addition of a put.

The addition of a put itself works like some sort of insurance policy where it limits the amount of loss to minimal. Of course, it also means that the profit is very finite as well. But it makes this strategy very popular among many novice options traders.

The traders who still not so sure about the trade they have to make, thus make them take the strategies with minimum loss. And in the same time give them the chance to learn more.

Buying Call Strategy

This is a very popular strategy that many options trader use. The main idea of buying call options is that when a trader buys call options and they can do anything with it. Either sell it right away, let it expire or call it away at the strike price.

Buying Put Strategy

This is one of the options trading strategies that very similar to the buying call options strategy. In this case, the traders buy a put and then they can choose to do anything with it. Just like when they applied to buy call strategy.

This strategy is done by the investors who want to get the profits on the downside.

Options Trading Strategies – Choice

Options trading and currency trading are quite different. They have different advantages and disadvantages. You need to choose your trading style to get the best result.