Two Good Reasons for Trading Options

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It is understandable why many investors prefer to buy stocks or trade them – trading stocks is simple, and there is certainly money to be made. Trading other instruments is, in most cases, complicated, and because of that, many investors and traders stick with trading stocks. Some financial instruments, however, can offer better benefits than trading stocks.

Options trading in Australia, in particular, has many benefits, and there are several good reasons why it is worth considering for anyone looking to invest. Let us look at the reasons why trading options in Australia can be a good idea.

Low Capital, High Return

One of the great reasons for options trading in Australia is the fact that it is possible to yield substantial profits without necessarily having to have a significant amount of capital. For that reason, options trading is perfect for investors or traders with the small capital as well as for those with vast capital. It is the leverage that options provide, which makes it possible to yield big profits with small investments. In simpler terms, investors can use leverage to get greater trading power from the capital they have.

Two Good Reasons for Trading Options

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For instance, let us say you have $500, and you wish to invest in XYZ stock, currently trading at $10, which you predict to rise in the short term. If you decide to buy those stocks with your $500, then you could have 50 shares. When the stock rises to, say $15 then you would make a $5 profit per share. In total, you would make $250 profit. It represents a 50% return on your investment.

On the other hand, you could buy the call options on the same XYZ stock. It will give you the right, not the obligation, to purchase the stock. If the options with a strike price of $10 were trading at $2 each, you could purchase 250 options; you would be able to buy 250 shares if the price goes up. If the stock rises to $15, you can exercise your option to purchase 250 shares, and then immediately sell them for a profit of $1,250. Taking away your initial investment of $500 to purchase the options, you will still have $750; a whopping 150% return on your money!

This was just an example, but it does show how you can generate substantial returns from whatever capital you have. Small capital, high return is the advantage trading ASX options has over other kinds of financial instruments.

Risk Levels

Remember, risks are always there with options trading in Australia because there are no financial instruments that do not entail risks. Whether you trade stocks, options, bonds or any other instrument, there are downsides of losing money. Some strategies can be very risky, especially the ones that are highly speculative in nature. Usually, strategies that help yield higher potential returns have a higher level of risks.

Fortunately, for options trading in Australia, investors can choose whatever level of risk they wish to take. The range of different ASX options contracts that investors can trade and the different numbers of orders they can place make it easier for investors to limit their risk than it is when trading stocks. As investors gain experience in trading ASX options, they will realize how effective tool options are when it comes to managing risk.

Options Trading in Australia – The Best Investment Approach

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Do you know you can earn excellent returns without taking high risks? ASX options trading is one of the safest ways to generate income. ASX options trading or options trading in Australia has many benefits as well. Let us look at some of the benefits of options trading in Australia.

Low Capital

Options trading in Australia does not require a substantial amount of capital. In fact, many investors prefer to trade in options because they require a low capital, have a low risk and deliver consistent returns. You can, as an investor, reap good profits by buying shares below market price and writing (selling) them above market price.

Options Trading in Australia

Flexibility

Unlike other types of securities, ASX options offer a plenty of flexibility to investors. There are a number of options trading strategies available using which investors can generate profit or cover their portfolio in bullish, bearish, and even neutral market conditions. These strategies may be confusing for beginners so partnering with someone expert in options trading in Australia would be a good idea.

Ability to Build and Diversify Portfolio

ASX options allow you to build and diversify your portfolio. By diversifying your portfolio, you will be able to buy and sell shares and also be able to hedge against market volatility. With ASX options, you should not only diversify with different stocks. You should diversify the option strategies as well. Again, experts in options trading would prove to be useful.

Like any other investment, the risks are there with options trading. However, with ASX options advice to create good trading strategies, the risks can be minimised.

Find good options advisors in Australia with the help of the internet. Experienced advisors can help lower your risks and maximise your profits. They have in-depth knowledge and understanding about the share market. They can help you solve your queries about your investment. More importantly, by partnering with professional advisors, you can at least eliminate the guesswork when it comes to making investment decisions.

For your part, you need to familiarise yourself with options trading and various strategies associated with it. Plenty of resources are available to help you in this regard. Once you are clear, confident, and have chosen the right trading strategy, you will have to keep yourself at the top of your trade game by following with the current market trends. Make the trades on your own with the help of various online resources and texts. You can also go for Australia options education, which can render you a good insight into this form of investment.

Whether you want to invest in options by first gaining insight on your own or with the help of ASX options advice, the experienced professionals at Total Options can help. Based in Queensland, Total Options is a collaboration of experienced and professional ASX advisors. They provide good advice on a range of options trading strategies. They also offer options education that helps investors gain understanding of options trading in Australia.

In order to know more about them, visit their website www.totaloptions.com.au.

Good Australian Share Market Tips

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If you are thinking about how you can generate steady income every month, then consider investing in the ASX, the Australian share market. The Australian Securities Exchange (ASX) is one of the largest exchange groups with a huge daily turnover, and it offers excellent products and services, i.e. the shares, futures, options, etc. through which traders and investors can reap good returns.

Australian Share Market Tips

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Before investing in the ASX, you should know that there are losses as well; however, certain ways exist through which you can curtail risks and improve your returns. Consider the following Australian share market tips, which may assist you in forming an investment strategy.

Always diversify your investment

Never allocate your whole capital or most portions of your capital in a single investment. If the investment does not perform well, you will lose everything. Of course, you will hate yourself if the stock of a certain company goes up 100% or 200% overnight, and you were about to invest everything you had in that company; nevertheless, the misery is far less than losing every dollar in case the stock of that company goes the other way. It is basic, yet very effective to diversify your investment, i.e. purchase shares of different companies.

Always consider all the worst things that could happen

If you believe there is nothing wrong about the investment you are thinking of making, then you should probably reconsider. Every investment carries risks, in some form or the other. Get Australian share market advice from someone expert and know about various risks associated with the investment you are contemplating on making. After understanding the risks, ask yourself whether the anticipated returns you expect is worthwhile.

Have a contingency plan

It is best to have a contingency plan ready for the unwanted situations. Whether you are trading shares, options or any other form of security, volatility exists in the ASX. Even if the trend is strong, volatility does exist in the market. You have to be prepared for the situations in case the market crashes or your strategy fails. Ask yourself the following questions:

-          When should I take the exit if my shares’ value began to fall?

-          What to do if I get a margin call? Should I keep the cash aside for such a situation?

-          What sort of loss can I take?

-          Can I take negative returns? If yes, then for how long?

Take Australian share market advice from experts

No matter how expert you may be, sometimes you may face situations where you will require taking assistance from someone expert who is experienced in providing Australian share market advice. Take the advice whenever needed; there is nothing wrong with it. Find and team up with professionals who can give stock market advice in Australia. They have enough experience and expertise in performing financial and technical analysis. These professionals can help you get out of difficult situations and assist you in making sensible investment decisions.

Getting Started with the Australian Share Market

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Anyone can buy shares from the ASX (Australian Securities Exchange)… the Australian share market. Making a sensible investment in the share market, i.e. buying good shares, can grow your wealth. However, in order to buy shares sensibly and create a good, diversified portfolio, it is vital to understand how the stock market works, research various companies, assess the risk and team with a good broker. Of course, a good Australian share market advice from the pros is also helpful.

Starting a portfolio

A piece of advice before starting with the share market: it is a double-edged sword where you can gain money as well as lose some. All right now, here is a trick on how to get started in the Australian share market with info on what you need in order to buy shares and build a rock-solid portfolio. Do not pick stocks at random; instead find a reputable broker that can also provide some Australian share market advice, do some research and then proceed to buy the shares.

Started with the Australian Share Market

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The first thing you will need is some capital. To get started with the share market, you will need some money–not much, but some. You can invest any amount of money in the share market, but the more money you have, the cheaper the brokerage fees will be.

Find a good broker. Once you have some money to set aside for investing in the share market, the next step is to find a broker. A broker works for an agency that simply takes your order (buy or sell the shares). Typically, agencies consider you as a client, and they often provide Australian share market advice to help you with your investments.

Decide whether you want to be an investor or a trader. Investors are the long-term buyers, and they often rely on fundamentals. They in most cases are in a safer position for their investment and are more likely to succeed. Traders, on the other hand, are those who buy and sell shares on a daily basis. They predominantly rely on technical analysis and often make quick money or lose money.

Now it is time to choose the stocks. For an investor, choosing 10 to 12 fundamentally strong stocks will give a nice portfolio with less risk than just choosing 3 or 4 shares for a portfolio. What you need to buy should depend upon the levels of return you are hoping, the levels of risk you are prepared to take, and the time frame you are willing to invest. Of course, research about the companies whose shares you are willing to buy is also necessary. Stock market advice too can be helpful in choosing the shares.

Do not look for shortcuts because there aren’t any. Share market, whether it is the Australian Securities Exchange, New York Stock Exchange or any other, is always volatile. No one can predict which shares will rise or fall. Always have a disaster plan, an exit strategy. If you do not know how to create such a plan, then take the assistance of your broker or stock market adviser in Australia.

Covered Calls Australia – Generate Consistent Cash Flow

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It is quite difficult these days for retirees to generate some consistent cash flow. The interest rates are not too attractive, and the yield on the 10-year Treasury bond is substantially below the long-term average. Many retirees today are even purchasing high-yield bonds, bond funds, and dividend-paying stocks in the hope of earning better yield. Unfortunately, the risk/reward ratio in the high-yield bond market is also not good right now–investors may not be getting proper rewards for the risks they are taking. The dividend-giving stocks could prove to be a nice income alternative, but it too depends upon an individual’s risk tolerance.

Covered Calls Australia – Generate Consistent Cash FlowThere is one strategy that many retirees (and investors too) often overlook, which by the way can help generate consistent cash flow. It is the covered calls strategy. Writing (selling) covered calls in Australian market against dividend-paying stocks can generate steady cash flow. However, remember that options trading in Australia is not suitable for all investors. The major drawback of writing covered calls Australia is that investors are limiting their upside potentials of their stock by giving someone the right to call (demand) it from them before the expiration date or at a strike price. Nevertheless, if the consistent cash flow is the main objective, writing covered calls Australia is worth considering.

Volatility is a crucial motif for investors to understand. Two totally different stocks may have same returns, but have entirely different volatility characteristics. The two kinds of volatilities that investors writing covered calls need to understand are implied volatility and historical volatility. The implied volatility is determined by the price of the option contract, and it will change with different expiration dates and strike prices. The historical volatility, also known as statistical volatility, is a measure of how unsteady the stock has been, and it can be calculated over different time-frames.

When investors are considering writing covered calls for income, they should be careful with the stocks that have high option-premiums. Options with high premiums may have a good return potential, but they are expensive and their implied volatility is high. A high implied volatility suggests that the market is expecting a wild price movement; perhaps because of some news, such as a legal case is about to be settled, or an earnings report is due.

No matter how attractive those high premiums may seem to be, retirees should stay away from such option contracts. Instead, they should buy stable, large-cap stocks that pay a decent dividend and have low volatility. The option premiums, of course, may seem mediocre, but at least, the volatility is low, which is important to generate steady cash flow.

Overall, writing covered calls is a good strategy to generate consistent cash flow. Retirees should stick with the large-cap stocks so they can get the best performance.

A Few Things to Know About ASX Options

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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” stoA Few Things to Know About ASX Optionsck 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.

Simple Australian Share Market Tips

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If you are contemplating about ways through which you can generate consistent monthly income, then investing in the Australian share market can be a good idea. The Australian share market, the ASX or Australian Securities Exchange, is one of the biggest listed exchange groups across the world. It has a considerably huge daily turnover, and it offers many products and services (trading tools like shares, options, futures, etc.) through which investors can yield excellent returns. A word of caution though, the share market game is a double-edged sword – investors can lose money as well. Nevertheless, there are ways by which you as an investor can minimise risks and improve the chances of better returns. Consider below Australian share market tips that may help you form an investment strategy.

Do not put your entire capital or most of your capital into any one investment

It is a poor choice if you Australian Share Market Tipsput everything into a single investment. You will, of course, resent yourself when a certain company goes up 200% or 400% overnight, and you were going to invest every dollar you got in that company; however, this agony is far less than losing everything in case the company goes downward. Even though it is a basic rule, it is effective to diversify your portfolio, i.e. invest in different stocks.

Before you invest, consider all the bad things

If you think that there is nothing bad about the investment you are considering making, then you need to give it a second thought. All investments carry some sort of risks. Get some Australian share market advice and know the risks of the investment you are contemplating on making. After you know what the risks are, ask yourself if the expected return you may get is worth it.

Always have a disaster plan

It is always a good idea to have a disaster plan for that “just in case” reason. As said earlier, the share market game is a double-edged sword where you can gain or you can lose. Remember, even if the market trend is strong, volatility still exists in the share market. You need to be ready for the trouble just in case your strategy fails or the market crashes. Ask yourself these questions:

  • When should I take the quit if the value of my shares began to fall?
  • What types of losses can I manage?
  • What will happen when I get a margin call? Should I keep the cash ready for such a situation?
  • Can I handle negative returns for some time?

Get professional Australian share market advice

You might be an expert, but sometimes you may come across a situation when you require an expert Australian share market advice. Do not hesitate; take the advice when the situation calls. Find and partner with someone who is an expert in giving good stock market advice in Australia. Such experts have the experience and skills in performing technical and financial analysis. They can help you make wise investment decisions.

Australian Share Market Advice for Those Who Want To Get Into the Share Market Game

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Do you want to get into the Australian share market, but do not know where to start? Have you seen your co-workers, family members or friends make money through share market and wish that you could make some money too? Below are some Australian share market tips that may help you get started, with the share market game.Australian Share Market Advice

Get the clear idea about the share market

When it comes to share market, there are many financial terms that may overwhelm you. Do not let it overwhelm you. It may be difficult at first to understand, but learning the financial jargons will help you become a well-informed share market player. There are many online websites available that will help you get a clear idea about the share market and its terms or jargons. Reading business and financial news daily is also helpful.

Observe and give it a try

Observe the market and try making a theoretical investment. Pick a few stocks you are interested and monitor them closely to see how they perform. Analyse how they performed in the past. Determine on a pragmatic amount of money that you may invest, and conclude on a time frame to observe your investment. Think about the level of risk you would be comfortable with if you were using real money. All this experience, without using your cash, is worthwhile in the share market game.

Get into the share market game

Many brokers will say that you can enter the share market with a minimum of $500. Nevertheless, it is a good idea to enter the share market with at least $2,000; it will help avoid brokerage fees eating away your profit. On a side note, you should always remember, only invest the amount of money you are prepared to lose. The share market is a double-edged sword.

Never invest everything in one share

Do not invest all your money in any one stock. The best thing to do is, diversify your portfolio; invest in different stocks. By diversifying your portfolio, you can reduce your overall risk. It also helps increase overall investment return.

Prefer long term investments

The stock market is always volatile–it can go up or go down in an instant. Do not worry if the price of your share drops down; it is imminent. Short-term trading can be a bad idea, especially for those who are just getting into share market game, as the market can be uncertain. You should prefer making long-term investments and determine beforehand on how long you will stay in the market.

Use your head; not your heart

When you are in the share market game, you need to cut all your emotional ties with certain companies. Loving certain companies’ products and services, does not equal a good investment. It is essential to examine how a company’s shares perform in advance of buying those shares.

Use the services of professional stock market advisors

Taking investment tips or Australian share market advice from someone you know, who trade, may not do you any good. Always perform market research by yourself, and if necessary, get in touch with a professional stock market advisor. A professional stock market advisor has considerable experience, knows how the share market works, and can give an excellent Australian share market advice.

Tips on How to Use Covered Calls Australia Successfully

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Writing covered calls in Australia can indeed produce consistent monthly income for investors. A covered call is an option trading strategy where investors write “sell” call options against the shares they already own. Usually, a call option consists 100 shares of a particular stock. In exchange for writing call options, investors receive a premium. The premium, however, comes with an obligation; if the buyer exercises the call option, the investor is obligated to deliver the shares to the buyer.

How to Use Covered CallsFortunately, investors already own the underlying stock, so their potential obligation is very much “covered.” Because the obligation of delivering the shares if the buyer exercises the option is covered, this strategy acquires its name “covered call” writing.

Covered call writing in Australia is a fairly conservative strategy. Nevertheless, there are risks associated with it. With proper ASX options advice, however, covered call writing risks can be minimised or averted. Here are three tips on how to use covered calls Australia successfully.

Keep market volatility in mind

Stocks that exhibit medium implied volatility are the most suitable for the covered call strategy. In case implied volatility is low, the premium that investors get will also be probably low. The premiums will be high if the implied volatility is high, but there is a trade-off.

If the implied volatility is high, the probability of the stock to move considerably in either direction is also high. It could mean that investors have a higher chance of taking a loss if the stock drops significantly, or of having their stock called if the price increases. With covered call strategy, it is to be remembered that if the price rises (and exceeds the strike price), the call buyer can exercise the option and demand the stock.

To be safe, investors should consider the stocks with options that exhibit medium implied volatility. Medium volatility should yield enough premium to make the trade worthy. It also eliminates the big risks that are associated with high-volatility stocks.

Plan with what to do if the stock goes down

Investors normally sell a covered call on a stock on which they are bullish in the long-term. It is really helpful to have a plan in place if the stock goes downward. Nobody likes it when stocks plummet–right? Investors have more choices than they think, however. Many investors assume that writing a call lock them in a position until the call expires. This is not true. Investors have the choice to buy the call and remove their obligation to deliver the stock.

If the stock has fallen since the investor sold the call, he or she may be able to buy the call back; that too at a cost lower than the initial sale price. This way, an investor can make a profit on the option position. Doing this buy-back also removes an investor’s obligation to surrender the stock if exercised. Investors also have the option to dump their long position and prevent further losses in case the stock continues to drop.

Consider buy-writes

If investors are really into covered calls writing, they need to consider an excellent strategy called “buy-write” first; with this strategy, they can buy the stock and write the call option, against that stock, in a single transaction. The strategy of buy-write is not limited to convenience only. One thing this buy-write strategy offers is an instant income, in the form of an option premium. Besides, such options often expire worthless; hence, the investors will get to keep the premium, as well as the ownership of the stock. In the bull market, buy-write strategy can underperform, but in flat and bear markets, the strategy is one of the best strategies for investors.

To conclude, covered calls can be an excellent strategy to generate consistent income. Normally, investors write covered calls on stocks, on which they are long-term bullish. Covered calls are useful on stocks that are stagnant in the short-term. Of course, there are some risks associated with covered calls, but with proper covered calls advice, risks can be minimised.

Ways to Use ASX Options as a Strategic Investment

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Trading ASX options as a strategic investment (investment made with the aim of generating safe, consistent returns), is very important for traders. Options trading in Australia provides traders excellent strategies that help boost their profits, decrease costs and extend trading approach. Even though many investors are reluctant of using ASX options, it is crucial to understand that these financial derivatives are no more or less risky than any other form of trading. ASX options are excellent financial derivatives that, when used safely, can be very beneficial to your portfolio. Another good thing about ASX options that most people do not realise is that they are short-term trading derivatives, and so it requires significantly less technical analysis than ordinary stock trading. Nevertheless, it is necessary to have some technical analysis skills for trading options as it can help predict the market movement and movement’s magnitude.Ways to Use ASX Options as a Strategic Investment

Here is how you can use ASX options as a strategic investment:

Recover some of the cost of your share market investment

If you already own some shares, you can slowly recover the cost of the shares by selling call options against them every month. This strategy is called covered call writing. Covered calls Australia are effective, and over a year, it is possible to write (sell) covered calls several times that you can in the course of time pay off everything you invested in the shares. Because you will already be having enough information about your shares, the technical analysis for covered calls Australia will not be complex.

Buy stock for half price

Buying deep in the money (DITM) options for a short term momentum trading is an excellent way to buy stocks at half the price. If you see possible growth of the stock over the next couple of months, you can rip the benefit from the strong delta of the option and purchase the rights to it at a substantially reduced premium.

Get paid to buy stocks

If you have a certain stock in mind that you would like to own, buy do not want to buy it at a higher market price, then the strategy of selling naked put options may prove to be useful. Every month, you sell put options against a stock, but at a strike price or exercise price that is lower than the price at which the stock is currently trading. In case the price of stock goes up, your put expires worthless, and you retain the money. If the price drops to your set price, you can buy it and wait to bag profit as the stock recoups back up. Once you have bought the stock, you can sell covered calls to further reduce the price you paid for it.

Profit from unstable markets

Do not sit idle in a volatile market. Look at the chances presented in such a market. Options strategies such as buying strangles or straddles, selling credit spreads, dealing in butterflies, etc. can yield excellent profit in a volatile market.

Selling the future

Using the credit spread strategy is an excellent way to make a steady profit of about 10% per month. Identify the market trend, and sell credit spreads every month to build your portfolio.

Options trading in Australia can be risky, but with the right approach or with a good ASX options advice, risks can be minimised and profit can be made. Today, a range of options trading strategies is available through which traders can yield excellent returns in almost any market condition. If you want to gain more insight on different ASX options strategies, including covered calls Australia, butterflies, and others, expert advisors at Total Options can help. Get in touch with them at www.totaloptions.com.au