Top 5 Strategies Of Options Trading For Beginner

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Options Trading, Beginners option trading

Hi Friends, Welcome to learning about options trading. It is useful for beginners. Options are a form of derivative contract that grants the buyers (the option holders) the choice, but not the responsibility, to buy or sell a security at a pre-determined price in the future.

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In exchange for such rights, buyers pay vendors an amount known as a premium. Should market prices be disadvantageous to option holders, they will let the option lapse unutilized and thus no losses beyond the premium amount. Conversely, if the market goes in favor of this option’s value, it is exercised. To start trading please go through Investopedia.

Options Trading for beginners
options trading strategies

In general, options are classified as “call” or “put.” With a call option, the buyer purchases the right to purchase the underlying asset at a predetermined price in the future, known as the exercise price or strike price. A put option allows the buyer to sell the underlying asset at a predetermined price in the future.

Let’s take a look at some basic strategies that a beginner investor can use with calls or puts to limit their risk. The first two involve using options to place a direct bet with a limited downside if the bet goes wrong. A hedging strategy is placed on top of an existing position in the other two cases.

Key Features: Options Trading For Beginners

  • Beginners often avoid options trading because it seems complicated or risky.
  • A novice investor can, however, protect their downside and hedge market risk with some basic options strategies.
  • Four such strategies are examined here: long calls, long puts, covered calls, protective puts, and straddles.
  • Before investing in options, it is important to understand the risks and rewards involved.

How to trade options:

There are 5 ways to options trading.

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