There are different ASX options trading strategies available today, but which one should you choose in order to yield a decent profit? If you search on the internet and go through different investing forums, you will find plenty of options trading opinions that can confuse even the moderate investors. Some investors employ academic approach and analyse profitability and risk from that perspective, while others employ a more adaptable approach. One thing is for sure, however — the main reason why investors prefer options trading is that they want to earn better profits than they can through any other stock trading strategy. With the crazy swings of the Australian Share Market over the past few years, most traders and investors have started to realize the absurdity of simple strategies like “buy and hold”, and have been looking for reliable, profit-generating trading tactics.
Is options trading lucrative?
Some investing forums will give you an impression that options trading in Australia is dangerous and risky. The fact is, any sort of trading is risky, but look at the magnitude of profit that options trading in Australia offers. In contrast to any other investment option, options trading yields exceptional returns. With a very small capital, you have the leverage to control big blocks of share, through which you can reap excellent profits whenever the market moves in the right direction. The disadvantage is that the same leverage also has the capability to erase your portfolio if the options trading strategy you are using does not address certain risk factors. Therefore, the answer to the simple question above is, yes. Trading option in Australia is lucrative, but in some circumstances, it can also be risky.
Is there any options trading strategy that can yield consistent profits?
Novice traders are often introduced to the simple ideas of buying call and put options. While this strategy is easy to understand and put to work, the truth is, in order to make it successful, you need to gain some skills for technical analysis that allow you to predict at least the direction and magnitude of the market swing. This simple strategy indeed provides the greatest potential for a huge profit, but in reality, such potential is not regularly achieved. Therefore, while the simple “buying call and put options” method has an excellent potential for a good profit, it is challenging to attain such potential on a regular basis.
Selling put options
Studies have shown that the most excellent options trading strategy, which can yield excellent profit on a consistent basis, involve not buying call options, but selling put options. Selling put options or selling credit spreads (suitable for those with lower margin limits), had proved to be more lucrative over the long run than any other options trading strategy. While the magnitude of profit is small than other options trading strategies, the consistency of making profit makes it the best strategy. Another excellent advantage of this strategy is that the technical analysis necessities for selling put options or credit spreads is not as tough as that required for other options trading strategies. The risks associated with this strategy are also less. With a solid trading plan, which includes an exit strategy, selling put options can yield more profit with less risk than any other trading strategy.
If you want to venture into ASX options trading, you will need study and understand different strategies and then develop a robust plan that can help yield consistent profit and at the same time minimise your risk. At Total Options, we provide Australian option education that can help you understand how options trading in Australia works. We even provide excellent ASX options advice that can help you yield consistent good returns with minimised risks. In order to know more about Total Options, visit www.totaloptions.com.au