Long Strangles – An Options Trading Strategy Worth Considering

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Options trading is very popular. There are a number of options trading strategies available to investors, and it is these strategies that make options trading so powerful.

Of all the options trading strategies, the long strangle is one exceptional strategy that every investor should consider. It involves buying a call option and put option, of the same underlying asset simultaneously. While just like the straddle (another options trading strategy), the expiration date remains the same, but in long strangle strategy, investors can buy the call option and put option with different strike prices. Typically, the call strike prices will be above the put strike prices, and both the options will be out-of-the-money. Because of out-of-the-money strike prices, the strangles will prove less expensive than the straddles; however, to reach the break-even, it requires a substantial move in the in the price of the underlying stock.

The reason why this options trading strategy is worth considering is its limited downside risk. The investor will incur loss only if the price of the underlying stock remains between the strikes until the expiration. At the expiration, if the price of the stock is between the strike prices, then both the call and put options will expire as worthless, and the premium paid by the investor for those options will have been lost.

The limited downside risk is not the only thing that makes the long strangle options strategy great. This options trading strategy offers unlimited gain potential. The investor gains when the price of the underlying stock moves significantly. If the underlying stock becomes valueless, the gains would be substantial. The gross profit at the expiration will be the difference between the price of the stock and (1) the strike price of the put if the underlying stock’s price is lower or (2) the strike price of the call if the underlying stock’s price is higher. The net profit would be the gross profit minus the premium paid by the investor for the options. The upside potential has no limit; while the downside potential has a limit because the no stock price can go below zero.

Thus, the potential profit by utilizing the long strangle options strategy is unlimited on the upside and considerable on the downside. The possible loss, on the other hand, is limited to only the premium paid for purchasing the options.

Want to learn more about long strangles and other options trading strategies? Total Options, experts in options trading in Australia, can help. They have considerable experience in options trading in Australia, and can give excellent ASX options advice. They also have Australia options education program, which teaches everything about options trading in Australia. To know more, visit www.totaloptions.com.au.

Smart Rules for Covered Calls Writing

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Writing covered calls is an exceptional options trading strategy to generate consistent monthly income. If you focus on short term contracts that are a little out of the money (OTM), the returns on covered calls are excellent. Writing covered calls on a regular basis is indeed one of the best conservative strategies. If you are willing to accept the risk of giving away your shares (in case the buyer exercises the option), then covered calls writing is a lucrative choice.

The covered calls strategy works well only if you stick to some smart rules:

  • For covered calls writing, select stocks that have strong fundamentals. One of the biggest problems with writing covered calls on stocks that are volatile is the loss, which arises when the stock price crashes. Because of this, you need to choose stocks of companies you think are safe and stable.
  • Carefully set the strike price. In every case, it should be above your net basis. When the covered call option is exercised, you want to ensure you end up with a profit, and not a loss. When writing covered calls, make sure to set the strike price higher than the price that you paid for the underlying security, i.e. the price of the 100 shares. Also, when writing covered calls, understand the “moneyness” of the option. See how it affects the premium as well as the probability of the option being exercised.
  • When the buyer exercises the option, just accept it. You should be willing to give away your shares; it is the risk of this strategy. Of course, you can avoid the exercise by closing or rolling out of positions, but before doing so, analyse the outcomes. Sometimes, letting the covered calls get exercised may prove to be advantageous.
  • Be mindful of the earnings announcements as well as the ex-dividend dates that will come up before the option expiry. Price reaction because of such events can affect the value of the call. The possibility of buyer exercising the option is more before the ex-dividend date. For that reason, be aware of such events.

Covered calls strategy can certainly be fruitful. A little caution is required, however. If required, take covered calls advice from an expert.

If you are in Australia and need advice on covered calls or want to learn moreabout covered calls Australia and other options trading strategies, then Total Options can help. Covered calls experts in Australia at Total Options have years of experience in trading covered calls. Along with the covered calls advice, Total Options even provides options education, which aims at teaching everything about options trading in Australia.

To learn more about covered calls Australia and Total Options, visit http://totaloptions.com.au/

Options Trading – Something That Investors Should Consider

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There are many investors who fear and stay clear of options. Some investors are not even aware of it. Well, options are something that investors should not overlook or avoid. In fact, every investor should learn about what options are because they are something that often proves to be profitable. Options help hedge portfolio and, not to forget, reduce the risk.

By definition, an option is a derivative product, a contract, that gives the buyer (the one who purchases that particular option) the right to buy or sell the shares (the shares of which the option is comprised) at a preset price, on or before a preset date. Bear in mind that the option buyer has the right to buy or sell the shares, but he or she is not under any obligation to do so. If the buyer does not exercise the option, the option expires worthless. Anyway, by writing options (selling options), the investors (option sellers) get instant returns in the form of option premiums.

There are over 26 options trading strategies that allow investors to generate wealth in rising, declining and even flat market conditions. So why would investors want to stay away from options trading? Besides, by trading options, investors also create an extra stream of income. How? Investors already own the shares despite writing an option against them. Therefore, any upcoming premium on those shares is solely theirs, unless if the option is exercised. If the option is exercised, the investors have to give away the shares. However, this does not happen very often. A carefully written option contract in most cases expires worthless; hence, there are very little chances for investors ending up on a losing side.

It is not a daunting task to begin with option trading, especially here in Australia. If you are new to the world of trading, the first thing you will need to do is open a trading account with one of the many brokerage firms. Only through brokerage firms, you will be able to trade options in Australia.

When you open an account with a brokerage firm of your choice for trading ASX options, you will have two choices: opening a cash account or opening a margin account. With a cash account, you can only use the amount of funds available in your account for buying options. Where else a marginal account allows you to borrow funds from the brokerage firm to finance further purchases of options.

Whether you decide to open a cash account or a margin account, you will be required to deposit a certain amount of money in your trading account. For a cash account, little or no cash is required; however, for a margin account, a certain amount of deposit is required.

That is it, once you open your account with the brokerage firm, you can start with the options trading in Australia. If you have no idea about options trading in Australia, then fortunately, there are some good ASX options advisers, like the ones at Total Options (http://totaloptions.com.au), who can give excellent trading advises as well as teach you how options trading in Australia works.

If you are looking for a smart way to invest your money, then considering options might certainly be an excellent idea. You can build wealth in any market conditions by trading options.

Choosing the Stocks to Write Covered Calls

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Covered calls writing (selling) is one of those popular options trading strategies that many investors, both expert and novice, use to produce consistent monthly income. Covered calls writing is popular for the following reasons:

  1. It is easy to learn, understand and trade
  2. It is a conservative and less risky strategy
  3. It helps produce consistent income

Those who have not heard of the covered call strategy, here is a brief overview: A covered call is a contract, comprising 100 shares of a stock you own. When you write a covered call, you give the right (only right and no obligation) to someone to buy those shares from you at a strike price (a predetermined price), on or before an expiration date (a predetermined date). For selling a covered call, you will instantly get a certain sum of money, which is called covered call premium.

If the stock value rises above the strike price, before the expiration of the contract, the buyer of your contract will exercise the option, and you will need to surrender your shares. In case the stock price does not reach the set strike price before the expiration of the contract, your option expires worthless, and you will retain your shares. You can use these shares again to write covered calls.

Covered call writing is a simple strategy; however, it is not easy to generate good returns consistently. Like any other trading strategies, covered call writing has risks. They are:

  • When the underlying stock’s value takes a sharp plunge, the loss from holding your shares will outstrip the gain from the covered call premium income.
  • When the underlying stock’s value abruptly rises, the buyer will exercise the option, and you will have to sell the shares at the strike price, missing out on the substantial gains that are above your strike price.

Considering these risks, it is necessary to formulate and choose the proper options trading plan. Choosing random stocks to write covered calls, or picking certain stocks based on their high premiums is not a right way to go.

Below are a couple of important aspects to consider while choosing the stocks on which you should write covered calls:

Select stocks with good fundamentals. Stocks with good fundamentals ensure good long-term returns. If you decide to write covered calls only for the purpose of generating consistent income, then you should pick stocks that you think would make excellent long-term investments. No matter how you decide to trade, you can still make a profit; however, a reliable and profitable company with strong fundamentals tends to keep their share prices stable. Keep in mind that you must first own a stock before you can write covered calls on that stock. Therefore, selecting stocks of ordinary and unprofitable companies will only add additional risk to the trade.

Select stocks with good growth prospects. Options written on growth stocks usually have a high premium available than average and predictable companies. The premium is high on growth stocks because such stocks are volatile, and with any news or other excitement about the company, the stocks will shoot up. In order to generate substantial income through covered calls, you will need to draw your attention towards the growth stocks. Not all growth stocks are same; hence, it will be very beneficial if you take some time to do online research and find the best ones.

Using the covered calls writing strategy can be the best way to generate consistent income. Although, they are easy to understand and trade, carrying out successful trades and generating profit on a consistent basis is not easy. Fortunately, these days, there is help available to improve your covered call trades; for instance, the experienced and skilled advisers at Total Options. Expert covered calls Australia advisers at Total Options have vast experience and knowledge that help them give you proper advices that can better the returns on your covered calls. Know more about covered calls Australia advisers at Total Options by visiting http://www.totaloptions.com.au/.

Why go for Options Trading in Australia?

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Why should you go for options trading in Australia? Well, to get an answer to that question, you should first ask yourself that as an investor, what your goals are. As an investor, do you want to make quick money? Or, do you want to create a steady stream of monthly income? Or, perhaps, you want to play safe and yield some consistent returns every month?

Why go for Options Trading in Australia

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Remember, in the share market game, there is no sure way to create a quick income. Maybe luck can give you excellent returns once or twice, but not always. And, it can also work the other way, i.e. lose money quickly. So make quick money is out of the question or should be out of the question if you want play in the share market. On the other hand, playing safe and generating consistent monthly returns is possible. And it is possible through options trading in Australia.

Options trading predominantly involves buying or selling the right, of an option contract, which, by the way, comprises of 100 shares of an underlying stock, at a prearranged price within a specified period of time. In simpler terms, you give the buyer the right to buy or sell your stock at a certain price before a certain date. Note that you only give the right to buy or sell your underlying stock; you cannot force the buyer to buy or sell your stock. In other words, the buyer is free from the obligation to buy or sell your stock. Nevertheless, if the buyer wants to exercise the option, i.e. if the buyer wants to buy or sell your stock, you are obliged to deliver the shares to the buyer.

What is the benefit of options trading? Well, you get instant money in the form of premium for writing the option contract. Further, if the option expires worthless, i.e. if the buyer does not exercise the option, you still have your shares with yourself. Another benefit of trading options, perhaps the most significant one, is the leverage it offers. With a single option contract, you are figuratively controlling 100 shares. If you are controlling 100 shares in the form of a single option contract, a slight movement in price can generate substantial profits! Of course, it can also mean a substantial loss, but there are options strategies that can minimise the risks.

One of the best things about options is the number of options trading strategies that are available to the investors. In total, there are about 26 options trading strategies available to the investors, which can help them minimise risks or generate consistent income irrespective of how the market performs. To put it in simpler words, whether the market is bullish (rising), bearish (declining) or flat (neutral), investors, using the right options trading strategies, can generate income.

Overall, options trading in Australia has its risks, but that does not mean you should be ignorant of it. Every trading product, whether it is an option, share or bond, carries risks. But, options are something through which you can produce consistent monthly income. Partner with someone who knows how options trading in Australia works and can offer a good ASX options advice, like the experienced advisers at Total Options (www.totaloptions.com.au). This way, you will be able to minimise risks and generate wealth through options trading in Australia.

Picking the Best Stocks to Write Covered Calls

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Covered calls writing is the best options strategy for those investors who are looking for a way to generate income in neutral market conditions. It is a conservative, less risky, easy-to-understand and easy-to-trade strategy.

Those who are unaware of the covered call strategy, here is a brief. For every 100 shares that you already own for a certain stock, you can sell (write) someone the right to buy those shares at a predetermined price before a predetermined expiry date. For that, you get a certain amount of money on the spot, which is called a premium. However, remember, you are only selling the right to someone to buy your shares; you are not enforcing any obligation on someone to buy your shares.

Picking the Best Stocks to Write Covered CallsAt the expiration, if the stock surpasses the predetermined price (it is called the strike price), you will have to sell your shares to the buyer of your option contract. As said above, the buyers of your shares have the right; hence, if the buyers wish, they can exercise the contract and buy your shares. In case the stock fails to reach the strike price, which often happens, your option expires worthless, and you will retain the ownership of your shares.

While the strategy is pretty straightforward, it is not always easy to yield good returns consistently. Covered calls writing has two risks:

  • If the price of your stock, against which you have written covered calls, surges up, you will miss on the gains because the buyer will exercise the option and you will have to sell your shares at the strike price, which now is below the current market price.
  • If the price of your stock drops abruptly, the loss from holding your shares will exceed the gains from the premium income.

In the light of this, it is important to choose a good trade plan. Choosing stocks arbitrarily to write covered calls or choosing stocks only because they have a high premium will most likely lead to failure.

Below are two important aspects, for choosing the proper stocks on which you can write covered calls:

Pick stocks with a strong technical. To be successful with the covered call strategy, you do not need expert-level technical analysis skills; however, basic knowledge of technical analysis is helpful. Technical analysis shows how the stock will perform in the short term. Therefore, get some basic understanding of the technical analysis. Online tools and resources are available, so it would not be too difficult.

Pick stocks with pragmatic premiums. When writing covered calls for income, it is essential to pick technically healthy stocks with a good premium. Good premium does not mean high premium or low premium, but pragmatic premium. Option contracts with high premium are dangerous, as they tend to have high volatility. No matter how attractive the returns may seem, stocks with high premiums are unfit for the covered call strategy.

Writing covered calls is an excellent strategy to produce income in flat market conditions. Nonetheless, just because it is straightforward to trade does not mean it is easy to execute it consistently. Fortunately, there are resources available to help improve your returns through covered calls. For instance, check out the skilled advisers at Total Options. The advisers at Total Options specialise in covered calls Australia. They can give excellent ASX options advice that can help improve the returns through covered calls writing. Learn more about Total Options by visiting their site www.totaloptions.com.au

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


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.