Like any other trading strategy, option trading has its risks, but the risk level can be made low, and it is more lucrative than stock trading. The best thing about options trading is it allows investors to develop a wide variety of strategies with different risk profiles.
Many people consider option trading a risky strategy, suitable only to speculators; it is not the case though. With the proper approach or the right options trading advice, an investor can generate consistent investment income or provide insurance for his or her share portfolio. Below are some ASX options trading strategies, which may help minimise risk and yield good profits.
- Selling Credit Spreads: – With minimum efforts, it is possible to grow your portfolio by 10 to 12 percent every month. Simplicity ensures success and, therefore, this strategy is not suitable for overactive traders or those who over analyse everything. All an investor needs to know is how to perform a simple trend analysis of the market, and on the group of certain selected stocks. This credit spread strategy is profitable and it is easy to implement.
- Selling Covered Calls: – If an investor already owns a stock, then he or she can reduce the cost of that stock effectively by writing (selling) covered calls on that specific stock every month. Besides, if the market is flat or down, selling covered calls may yield excellent investment income. One great thing about covered calls is that a covered call writer retains voting and dividend rights on the underlying stock.
- Buying and selling “Deep-in-the-money” options: – This is an excellent option trading strategy. It enables investors to buy stocks effectively at about half price and, therefore, double their profit. Because the investors’ trades are all short term, they are not bothered about dividends or other aspects about buying and holding stocks. They, however, do benefit as the price movement of the stock precisely matches the price movement of the option they purchased.
- Complex strategies: – Various complex strategies, such as collars, butterflies, strangles, and several others can reduce risks and help yield high profit. The only downside of such strategies is that they are all expensive in terms of brokerage fees or the high cost of an option itself.
Selecting the best option trading strategy is easy if the right information is available. While above strategies may seem difficult to understand, especially to the novice investors, they certainly can help generate consistent investment income or at least reduce options trading risks. Alternatively, investors can also team up with professional advisors who can provide an expert ASX options advice. Along with Australian share market advice, professional advisors, like at Total Options, can also provide option education, which helps investors gain deep insight about how option trading in Australia works.
To get in touch with professional option trading advisors at Total Options, just follow this link http://totaloptions.com.au/