Out of various options trading strategies that are available on ASX, how do you decide which one will yield good returns? When you explore various investing forums, you will find numerous different opinions; it only makes thing hard to find out the right trading strategy. Some experts employ a rigid academic approach in order to analyse risk and profitability while others sort to a more flexible approach. One fact, however, remains—the primary reason these investors utilise options is because they want to earn healthy returns which ordinary stock trading strategy cannot yield. With the strange gyration of the Australian stock market in the last few years, many investors have started to understand the ineffectiveness of strategies like “buy and hold”, and have been searching for more conservative, profitable trading strategies.
Is Options Trading in Australia Profitable?
Many investing forums will have you believe that options are highly risky and dangerous. The fact is that for the sheer scale of profit, ASX options trading cannot be beaten. The magnitude of the potential gain offered by ASX options is enormous. For a small amount of investment, you have the ability to control large blocks of stock, and can garner excellent profits from a move in the favourable direction. The downside is that options also have the ability to wreak your portfolio, if you are employing a trading strategy that does not address the risks of the particular strategy. In short, the simple answer to the above question is yes; options trading in Australia can be profitable, but it can be risky as well in some situations.
Is there a consistently profitable strategy for trading options?
Most traders new to options trading are simply introduced to the concepts of buying calls or puts. While these concepts are easy to understand and implement, the fact is that, in order to be successful with options trading, you should have excellent technical analysis skills that allow you to calculate the direction as well as magnitude of any market moves. This options strategy indeed the largest potential for profit, but the fact is that such potential is often not achieved. From one single large loss, it often requires several good trades to recover. Therefore, while the buying calls and puts strategy has the greatest potential for profit, it is difficult to achieve that potential on a frequent or consistent basis.
As per our experience, the most profitable options strategy involves not buying, but selling options. Selling puts or credit spreads is more profitable over the long term than any other approach. The magnitude of the profit is less than other strategies, but consistency of profit is possible with this strategy. The notable advantage of this strategy is that the analysis requirements for selling credit spreads or selling puts is not as rigid as the requirements for other strategies. The degree of risk is also comparatively lower at every level. With an excellent trading plan, which also includes a nice exit strategy, selling options can be less risky and more profitable than most stock trading strategies.
If you are thinking about options trading in Australia, you will need to understand different strategies and create a sturdy trading plan in order to yield excellent profits with minimised risks. Partner with us to learn how to do this. Follow the link in order to contact us http://totaloptions.com.au/