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.
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