People want to start making money fast. The best strategy to use for that goal is trading options. When most people think of options they assume that there risky. Which in fact, they are for those who don't trade them correctly.
Stock options are used to create leverage and control risk. The strategies I learned from my mentors are profitable and simple once you get the hang of them.
There are two types of options, calls and puts. There are also two things you can do with any option, either buy it or sell it. The most basic strategy for using options is called a covered call. The strategy is composed of two different positions.
If you were long underlying xyz which is trading at $15.00 you would sell a call option against it and collect money in your account for selling that option.
Buy 100 shares of xyz at $15.00 and sell 1 contract (which is equal to 100 shares of stock) of the 15 strike calls with 30 days until expiration and collect $1 per share or $100 total.
At expiration you make money if xyz is trading above $14.00. Yes, you can make money even when your stocks go down!
Option Selling
There are so many ways to make extra money. Trading options is the one that can really change your life. There are so many situations you can put yourself in through trading options that give you a mathematical edge.
Most people think trading options is risky. The reason is most people lose money who trade options! 80% of options expire worthless. So, who's making all of the money? The people who are buying those options or those who are selling them.
The reason people say that options are risky is because they don't understand them. If they did they would have a much different opinion. Just ask a successful market maker what he or she thinks about options. Market makers that I follow know a lot of ways to make extra money.
They are going to tell a completely different story. Options reduce risk and maximize profits if traded correctly. In this page I will show you some of my favorite strategies that put me on the winning side. The side where I have the mathematical advantage.
Positive time decay means that every day that passes option premiums decay or erode. In other words if stock xyz is trading at $20 today and the $20 call is trading at $1.95 then a day later all other things being equal that option will be trading for less than $1.95 because there is less time for it to be worth something.
There are a few important parts to my overall trading plan.
- Price and plan for entering
- Choosing the correct strategy
- Plan for exiting the trade
- Position Size
All four of these pieces to the puzzle are very important. The one I will focus on now is choosing the correct strategy.
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