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?
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.