One question that most novice investors seek answers to is, what is options trading? Many investors stick to stocks, mutual funds and bonds, but they stay clear of options. Is options trading too risky? Are options too complicated? Here are some things that investors should know about the options.
Options trading in Australia is less risky than trading stocks. The popular “buy and hold” stock trading strategy can be very risky. Stock market volatilities have completely wiped out many people’s retirement plans. Some are still trying to recover. There are limited choices while trading stocks. Options trading, on the other hand, is mostly short term, and it takes advantage of upward, downward and even sideward trends in the market. There are different options trading strategies available that offer a much lower risk profile than traditional “buy and hold.”
Like any other securities, ASX options can be risky. The biggest problem with options trading is not its inherent risk, but the greed of the investors. People falling for “get rich quick” schemes get into trouble. To be successful, investors need to have a good options trading plan, and they need to stick to the trading rules. This is essential because some–NOT ALL–options trading strategies carry the risk of 100% loss. A good ASX options advice can be helpful.
Options trading in Australia does not require superior analysis skills. Some analysis skills are required, but not as much as it requires with stock trading. When you are trading stocks, you need to have skills for both fundamental and technical analysis. Fundamental analysis helps pick a good company, and technical analysis helps pick the right trade. On the contrary, options trading is simple. Each options strategy has its own shallow set of technical indicators. For instance, when selling credit spreads, the investors only need to know how to identify the trend and how to select resistance and support levels.
Options trading in Australia does not require a big time commitment. With options trading, it is possible to grow the portfolio steadily every month with less than two to three hours of work per week. For experienced investors with day-trading style, however, options trading can certainly keep them occupied.
Options trading in Australia does require an active involvement, but it can deliver steady, solid growth in all types of market conditions. If you are a first-timer, start with low-risk options strategy and build your experience and knowledge. Further, it can be a good idea to team up with professionals who can provide ASX options advice along with proper Australian options education. This way, you can start safely with options trading in Australia.