Options trading strategies exist because someone had the foresight to create options on stocks, ETF’s, indexes, etc. Anyone, even a novice trader, can use one of the many trading strategies to play the underlying security.
The truth is a trader can be on both sides of the market at the same time with some of these strategies. They can be betting a certain security will go one way while hedging that with a position that says it will go the other way.
Sometimes you as the trader can be the one who takes in the option premium by simply selling that particular option. If you become the seller, you believe the underlying security will go the opposite way and you will not only be able to pocket the premium amount but you won’t have to pay out should you be on the wrong side option tips.
Understanding this style of trading is of course paramount before you enter the game. If you don’t know a basic put or call from a hole in the ground, you probably shouldn’t even be in the game. You are only asking to lose money if you don’t understand at least the fundamentals of options trading.
Because of this thing called the Internet, an options trader can do what is commonly called online options trading. The trader still uses a trading house such as an established full time broker but instead of going into a bricks and mortar office, the trader executes the trade on his computer.
One of the best ways to understand and discover trading strategies you can use is to visit several options trading and/or information sites and read everything they publish on options. For example, if you want to pocket the premium and still hedge your position, you might do a credit spread.
This particular spread allows you to make money selling an option on a particular security while buying an option on this same security but further out in time. Should what I just said sound like a foreign language, don’t worry about it. Your research will have tons of examples.
Most online brokerage houses have an options department devoted to explaining options, discussing stock options trading, suggesting certain options trading systems and more. Their goal is to provide you the trader with as much knowledge about the product as they can. They want you to trade through them so they can benefit from the commissions earned.
If you are adverse to begin your journey to discovering option trading strategies through brokerage houses, search engines offer numerous alternatives. Options trading strategies will become second nature to the trader who is intent on learning this fast paced and exciting investment vehicle.