ASX Options Trading Strategies

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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.

ASX Options Trading Strategies

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/

Choosing the Right Adviser for Options Trading in Australia

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If you decide to invest your money in ASX options trading, one vital decision you need to take is to choose a reliable advisor.

To trade in the share market, you may already be utilizing the services of a broker. However, if your broker gives advice, in addition to share market advice, on derivatives such as options, it is obligatory they be qualified to advise on such a derivative.

invest your money in ASX options trading

The requirements of option traders are not same as to those of traders who just deal in share trading. Option trading in Australia requires more frequent monitoring than equity trading because of the added risks affiliated with it. You have to be confident that your ASX options advisor delivers the level of service that you require.

Different types of broker

Options’ trading in Australia is carried out through three different types of broker. They are

  • Full service brokers – Such brokers offer you advice as well as research and other services like option education.
  • Discount brokers – These brokers do not offer advice, but they just carry out instructions to either buy or sell. You can give them instruction over the internet or just by a telephone call.
  • A combination of full service and discount brokers – Such brokers will execute trade service while also offering limited other services.

You should choose a broker as per your trading experience, your knowledge in options trading, your confidence in trading, and time.

Qualifications of an ASX options adviser

An options adviser, to give advice relating to derivatives transactions, needs to be accredited by Australian Securities Exchange. The design of the accreditation program is such that it makes advisers capable of giving expert advice and other services on ASX derivatives. ASX specifies two levels of accreditation—Level 1 or Level 2.

A Level 1 accreditation advisor can give advices on

  • Exercising warrants
  • Writing covered call options
  • Taking options
  • Selling options to close on taken position

A Level 2 accreditation advisor can give advices on

  • Taking or writing LEPOs (Low Exercise Price Options)
  • Writing options
  • Multi-leg option strategies

To become a Level 2 accreditation holder, a candidate must first achieve Level 1 accreditation.

Commission Structure

Commissions the brokers charge may vary and they can be

  • A flat fee on a per transaction basis
  • A Percentage basis where a broker charges a certain percent commission on the gross value of the transaction
  • A combination of a flat fee and percentage basis where a broker will charge a flat fee for transactions of a certain value, and thereafter will charge on a percentage basis

In case if you happen to be an experienced options trader, doing research and price monitoring on your own, you may simply need a broker to carry out your orders. For such service, you can pay a little commission. If you are amateur or new to Australian stock market, you need to have a professional and experienced options adviser work for you and forego the cheap commission option.

Selecting the right adviser

You will first need to contact several options advisers in order to find out the details about the following aspects

  • Their investment philosophy
  • The services they offer
  • The commission they charge, and on what basis
  • The size of investments they handle

It is advisable to meet the potential adviser face-to-face before making your decision to choose them. With your potential adviser, you should feel comfortable, and you should also have the confidence that they will offer the kind of service you need. A good adviser not only provides the right advice but educates their clients, as well. If you are in Queensland, professional and experienced option advisers at Total Options are the best people to contact with, and begin your trading career.

ASX Options Trading – The Best Way To Invest Your Savings

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Investing some proportion of your salary or earnings is the wise thing to do. Even though it is tempting to spend all your salary and earnings shopping and purchasing new things, make a rational decision to save some money, and at the same time, be profitable. In this day and age, when everything is volatile, saving money can prove to be your smartest move. Once you have enough money in your savings account, you can shift your attention of making that savings earn good returns for you. However, how can you make your savings generate good returns? Well, the best way to start is by investing your savings in ASX options trading, which has several benefits.

One of the most significant benefits of ASX options is that you can begin investing in them without having a big capital. In fact, many investors prefer to invest in options only because of their low risks and high returns. As an investor, you can reap good profits by buying shares below current market value and selling them above current market value.

Another benefit of options is that they offer great flexibility to investors in contrast to other types of assets. With expert ASX options advice, you can insure your portfolio or book profit regardless of whether the share price goes up or goes down.

Options are also an excellent way to build and diversify your portfolio. With diversified portfolio, you can buy and sell shares, as well as use options to hedge against current market volatility. Like any other investment option, there are risks associated with options. However, with proper ASX options advice to form good options trading strategies, the risks associated with options can be minimised.

With the help of the internet or through recommendation, find a reputable and reliable options trading advisor. Such advisors, through various income strategies, help maximise your profits with the minimum level of risks. They are professional and have a complete understanding about the Australian Securities Exchange. They also promptly help answer issues or questions relating to your investment. Finally, and most importantly, by getting help from an expert advisor, you will at least be able to eliminate the guesswork when making investment decisions.

On your part, you should engross yourself in all the available resources pertaining to this form of investment as well as strategies like covered calls and collars options that you can exercise to your advantage. Once you are well acquainted, confident, and have chosen the right trading strategy, you have to try to keep yourself on top of the game by staying in harmony with the latest market developments, which can have some influence on your investment. Try investing by yourself through useful resources and literature. Best, you can also go for Australia option education through which you can gain better understanding about securities.

Whether you want to invest in options with the help of an expert advice or you want to invest in options by first gaining a complete insight on them, the Total Options can help you. Total Options, based in Queensland, is a collaboration of professional and experienced option advisers. They provide expert advice on a diverse range of option trading strategies. Along with expert advice, Total Options also provide option education that gives investors a valuable insight on options trading in Australia.

Practical Trading Strategies That Lay A Good Foundation For A Long Trading Career

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There’s a bounty of trading strategies out there and new trading enthusiasts are developing their own in hope of pushing the industry further. These are all fantastic developments, but long-time trading professionals claim that these trading strategies are only fully effective if people know how to support them with practical life strategies.

 

For example, it’s crucial to recognise that a trader has to have the right mindset or psychological makeup to make sound trading tactics work. They need to fully understand the principles behind these strategies by doing their homework, getting background information, and performing other such tasks for correct application that would yield target results. Likewise, they need to be able to trade without letting their emotions, or things like their family circumstances, affect their trading judgment. If a trader fails to acknowledge the importance of having the right psyche for trading, not only will the activity be frustrating, but it will also be impossible to create a career out of it.

 

Another practical strategy that’s highly recommended by seasoned traders is to develop focus. Since it’s so easy to do other things while trading, a lot of traders fail to go the extra distance in making sure that they have thoroughly studied their options and the moves to make. Also an issue is the desire to try all the strategies available at once – not only will their understanding of the strengths of these strategies be compromised, but the final trading call will likely be the result of a confused process as well. The key is to focus on the goal and that one established, trusted path of getting there.

 

Third is to simplify the process. So many traders insist on complicating what they need to do when strategies have already been defined clearly, and the steps have been laid out in an organised fashion. Experts have drawn the process up; they have tried it and proven its efficacy, so there’s no need to deviate from it and improvise especially if you have not yet tried it before. So much time can be wasted trying to figure out what else needs to be done, when traders can simply do something that’s been proven effective, and benefit from it already.

 

And the last is to work on your “timing.” When you make the trading call, how you organise your day so you can cater to other things that may demand your time, which hours of the day are most productive for you – these all pertain to the value of timing in trading. The great thing about trading is that it will allow you to do other things, and with the rise of advanced technology used for it, it has become so much easier and more convenient to do. However, it’s crucial to truly understand the time and set a schedule for trading so it will not rule your life. A lot of traders tend to let the activity take hours, which they could be dedicating to their families and other responsibilities — but with a set schedule for trading, work-life balance can be maintained.

 

Understanding The Risks And Benefits Of Covered Calls

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For those who are not too familiar with common trading jargon, you may not readily understand the concept of the covered call strategy and its function in trading activity. To shed some light on it, basically, it’s a low-risk strategy where an investor or trader holds a long-term position in an asset and writes/sells call options on that particular asset in hopes of generating a bigger income from it.

 

However, like all strategies for trading and investments, using covered calls has both benefits and risks. It’s imperative to know what they are so you can take a step back and analyse your trading situation before applying this strategy.

 

The most important advantage is that compared to all the other known low-risk strategies out there, it’s said that becoming an expert at covered call writing can secure the highest profit – much, much higher than if other strategies were used. Everybody’s into trading to harness wealth, so this advantage is surely the most attractive.

The second benefit covered calls offer is the way traders actually have more control over the outcome. Writing a call allows traders to really examine the conditions their stocks are dealing with and determine the best decisions on what should be done, say, if the stock’s value declines after the traders have entered a position, or if the price of the stock appreciates. The trader who has mastered covered call writing has that great opportunity to fortify his wins and mitigate losses.

 

As for the risks or disadvantages, profit potential, when investors have established a covered call position, is automatically limited to the strike price (the price at which a put or call option can be exercised). So, if you were too hasty in writing a $70 call on a stock that you originally purchased at $65, and due to an unexpected twist of events the market dictated that that the new value of the stock is already up at $85, you have no other option but to sell at the price that you have written. Instead of a $20 profit, you limited yours to a mere $5.

 

And the second risk is that due to the simplicity of the move, a lot of investors are easily convinced that they already know everything that needs to be considered in employing covered calls, only to realise that they’ve traded too soon. It takes at least three to four months to fully explore the capabilities and potential of this strategy.

 

Therefore, for those who want to use covered calls to help themselves reach an advantageous position as traders or investors, it’s crucial to get some mastery in it. This is possible through persistent study, practice, and proper coaching from respected names in the trading industry. In time, they can truly expect to make the strategy work optimally for them in securing trading success.

 

The Importance Of Having The Right Mindset In Trading ASX Options Successfully

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Currently, the Australian Stock Exchange is thriving particularly well. A lot of people are encouraged by the solid performance of the Australian market as well as the lingering optimism within the economic sector. Further reinforcing this are recent reports that the ASX’s profit is up by 10 percent — it’s surely no wonder, then, that the country’s proving to be an important player in the global economic scene.

 

And because of all these, locals and foreigners have a lot of confidence in investing in ASX options. Knowing how a considerable number of them perform well consistently in the market, trading these options holds great promise for profitability. It’s all good, but profitability or success in trading does not always depend on ideal conditions (although that’s always a contributing factor). To yield wins in trading ASX options, it’s imperative to know the dos and don’ts, the strategies that all professional traders highly recommend, and the right attitude or mindset to have so trading can become a reliable source of income.

 

From the three things mentioned, it’s important to discuss how trading ASX options successfully is achieved by having the right mindset because most easily get lost in the abundance of tips on how to score wins. Trading professionals declare that “…having the right psychological makeup to follow the rules of an established trading system can make a whole lot of difference in one’s trading career.” This then goes to show that a sound trading system is not enough to ensure success; the trader’s ability to implement the system properly with the right discipline and motivation is what nets in not just an attractive income, but also positive and valuable experience.

 

It’s imperative to be a completely logical trader, devoid of emotions (for emotions tend to cloud judgment and force people to just react instead of thinking clearly about the cause and effect of certain actions first). Most people are naturally driven by emotions, and perhaps even the very decision to trade is prompted by some strong desire, but professional traders say that success in trading and maintaining a trading career can only be possible if traders know how to take the emotional factor out of the process.

 

While it may seem hard since it’s like going against man’s natural makeup, there are trading trainers or coaches that can help those who want to be successful traders in developing this right psychological mindset. Step by step, they guide their students into the thoroughly logical way of understanding market performance and the many variables that impact it. These coaches make sure “newbie” traders fully understand the principles to apply and become smart traders that do not just rely on favourable market conditions, but can also emerge as winners no matter the market conditions.

What Are Covered Calls?

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One of the cardinal rules of investment is fully understanding the terminologies used as well as the strategies implemented. This allows the trader to make sound investment decisions as well as minimise associated risks.

 

In options trading, one of the strategies used by many seasoned investors is covered calls. But what exactly is a covered call option?

 

Owning a stock entitles you to several rights. These rights include the option to sell stocks at their current market value any time you wish to. In covered call writing, you are selling to the buyer such a right at a predetermined price prior to the expiry. Essentially, the buyer attains the legal right to purchase shares of the underlying stock at a predetermined price (also called strike price). If you (the seller) own those underlying shares, the options are called covered because the shares are not purchased at an open market and at a predetermined price.

 

This strategy is viewed by many options traders as conservative strategy. It is particularly beneficial for traders who are bullish or neutral in their outlook on some of the equities in their portfolios. Investors who are looking to trade upside potential for downside protection and those who want to be paid for the assumption of the obligation of selling stocks at a strike price should also consider this strategy.

 

This strategy can be implemented when you want to produce income from some of the stocks in your portfolio. Other investors utilise this strategy in order to profit from option premium time decay. It is also advantageous to make use of covered calls if you want to keep your stocks for the long-term, either for the dividends or the tax benefits. Some investors who feel that the value of their stocks won’t appreciate or even drop in value opt for this strategy. Finally, a lot of investors who feel that their stocks are overvalued use this strategy to their advantage in order to profit.

 

It is important to note, however, that this strategy has its risks. If you are going to use this strategy, it is important to hold on to the shares. If you do not, you risk what is called a naked call. In a naked call, the potential for loss increases when the stock increases in value. If such happens, your next recourse would be to purchase back the option position. However, you may suffer some losses, both in terms of cash outlay and profit.

The Wealth-Building Advantages Of Hiring An Options Strategies Adviser

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Investing for the future is never an easy task, and it has become even more challenging and complex with the way the global economy and financial landscape has changed into a fast-evolving, highly volatile environment in the past few years. There are a number of reasons for this, from the political to the environmental to the technological – everything is moving at top speed and growing at an exponential rate. Empires are built in the blink of an eye. Dynasties crash overnight. Startups become supernovas before you know it. It seems that there’s always something booming or zooming or exploding, for better or for worse. All these developments can have a huge impact on the wealth-building project of any diligent options strategies investor.

 

People who go for options strategies as an investment tool know that combining a share portfolio with options provides multiple benefits: consistent flow of income, the ability to buy and share shares at a profit, the capacity to increase income by utilising it and the opportunity to have an insured and diversified portfolio are just some of the few reasons why it can be a valuable and lucrative choice.

 

The flexibility of options strategies also provides the investor sufficient protection regardless of the direction the market is taking. The options strategies are as follows: share insurance for your share portfolio, collar options as an income-generating tool equipped with capital protection, selling put option for those looking for another way to purchase shares, covered calls that focus on the share portfolio, and the income strategy as an advance form of covered calls strategy. Whether you are utilising it for your Self Managed Superannuation Fund (SMSF) or for private wealth building, the right options strategies allow you to manage risks more effectively in today’s dynamic market.

 

Figuring out which of these best suits your capacity, needs, preferences and expectations can be confusing. Despite putting much time on learning about the markets, private investors will still need expert-level knowledge and sophistication if they want to ensure their investments are protected and their financial status is secured despite uncertain times. Expertise is only gained through experience, and this is where the services of a professional investment adviser can be crucial.

 

Your investment adviser can map your specific situation amidst the current financial landscape and help you craft the right strategy that is objective, forward-looking and predictive rather than reactive. Advisers will also focus on furthering your wealth-building literacy by helping you understand trends and concepts that are important to consider when making decisions. In a number of ways, your investment adviser can be a consultant, guide, teacher and confidante, playing a vital role in your life as you prepare for your future. Investing in the right advisory service before you invest can be just one of the smartest investment moves you can ever make.

Investing In ASX Options – Tips On Ensuring Success In Trading

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Compared to other economies, Australia fared particularly well during the height of the global economic recession, so it’s also not surprising that it was one of the very few countries that easily bounced back from the “economic devastation.” Consequently, a lot of investors directed their sights on the Australian stock market for they knew that most of the stocks it offers can secure substantial profit.

 

If you’re one of these people and you’re considering trading ASX options in the hopes of making more money, there really is nothing much to it; similar to trading other options, making the right calls is really what can generate the income you want. But how do you make sure that you’re making the right decision for your investment?

 

There are some considerations, of course; first of all, you need to make sure that your account is with a reliable broker. You wouldn’t want to be using a platform that will hold your profits hostage or is not even consistent in replying to your queries about your investment. It’s commonly advised as well to make sure that the broker offers a variety of ASX options and trading tools that you can use to increase your success potential.

 

Study the features of the options, too – the underlying securities, contract size, exercise price and expiry date. Getting information about these will help you decide which ones to trade either right away or for the long term.

 

Likewise, it’s imperative to stay abreast with popular trading strategies. TotalOptions.com.au actually provides traders a number of trading strategies that have all been proven effective.  There’s comprehensive information about every strategy describing their purpose, and you can easily choose one from the selection that you feel is required by your target outcome.

 

A continuous pursuit of knowledge about trading and the Australian stock market is also crucial for success. Like what they always say, “knowledge is power.” The more extensive the information on trading ASX options you have, the more strategic you can become with your trading calls – you can make in-depth comparisons and anticipate market behaviour due to the presence of certain variables and recent goings-on in the global trading community that can impact your investment returns. Plus, you can further modify or fine-tune your trading style so the results of your decisions would be more consistently successful. If you need more trading information, take time to read books that the best in the industry have written, or you can even sign up for training.

 

These are some valuable considerations if you’re interested in trading ASX options. Apply the lessons behind them and you can automatically increase your chances of getting a satisfying return on your investment.

Option Trading – Bull Call Spread

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This is a recent trade of Option Expert William Chien, if you are interested in speaking to William about his option trading strategies call 07 5504 2244.

(This publication is not providing advice, it is just published as an example.)

 

FXJ appears to be resting on its long term uptrend line at the $0.72 level before it moves higher again (see below daily FXJ chart).

 

Hence, I would recommend the following FXJ bull call spread trade to take advantage of a potential rise in the FXJ share price.

 

Buy 400 May FXJ $0.75 call & Sell 400 May FXJ $0.85 call for a net debit of about $0.02 per spread GTC; costing about $800 in premium (before brokerage)

 

  • Low risk: maximum potential loss = $800 plus brokerage
  • No ongoing margin requirement
  • High potential profit: if FXJ trades up to $0.85 as per my projection, then we will achieve a profit in excess of $2,000 (see below payoff diagram)

 

Although the recommended trade size is 400 spreads, client can elect to trade a different size to suit their risk tolerance.

Please ring the Dealing Desk and ask for William on 1300 73 66 22 if you are interested in his Option Trade.

 

Option Trading - Bull Call Spread