A Brief Overview
Options trading serves as a good trading option for those who would like to trade with a lower capital. Although options bring with them a number of risks, the potential for reaping high returns is equally strong. Once an understanding of options trading is established, read on to understand the options trading strategies that are worth knowing.
Defining Options Trading
Options trading refers to the trading of securities wherein you can buy and sell specified securities with an understanding that this would occur on a specified price and specified date and time.
Set against this backdrop, options can be understood to be contracts that are linked to an underlying asset which may be in the form of a stock or another security. The contract mentioned here stays in effect for a period of time that has previously been outlined and may range from one day to several years.
Upon buying an option, you may then trade the underlying asset associated with it, but you are not obliged to do so. If you do in fact decide to trade with your option, you exercise the said option.
Should you seek to invest in options on your own via a self-directed account (i.e., those that allow you to pick and choose your options) akin to those available on Angel One, you are able to control each of your trading decisions and transactions entirely on your own. Should you wish, you can also seek out suggestions from experts in the field.
By using Insta Trade on Angel One App you can trade in options in a simple manner. When you expect either the index or the stock to go up you buy a call and when you expect the index or the stock to go down you buy a put. Insta Trade allows you to trade options in a simple manner, with all the tools and information you need on the same screen. As an independent trader they can also keep themselves abreast of some options trading strategies. Some examples of strategies are provided below.
Options Trading Strategies
Covered Calls - This options strategy is made up of two parts which are as follows.
1. Purchasing the underlying asset in question.
2. Followed by selling call options for the same asset.
So long as the stock price doesn’t move about the strike price, you are able to generate profits by virtue of selling call options for the assets in your possession.
Married Puts – Under this put options strategy, you purchase an asset and then follow it up by purchasing put options that amount to the same number of shares. With this approach, you are provided with downside protection as you are entitled to sell at the strike price.
Long Straddle – With this strategy, you can buy a call and put option for the same asset with the same strike price and expiration date simultaneously. Investors may seek to use this approach in instances of uncertainty wherein they are not sure of which direction the prices of underlying assets would likely move.
Bull Call Spread – Here, an investor buys calls at a specific strike price while at the same time selling the same number of calls at a strike price that exceeds the one he buys the other calls at. Here, both call options have the same expiration date and hold true for the same underlying asset. This strategy is most often used in instances where investors have a bullish attitude towards the underlying asset and expect its price to rise in moderation.
Bear Put Spread - A vertical spread, this strategy focuses on investors purchasing put options at a specific price while at the same time also selling the same number of puts at a strike price that falls below the other strike price. Each of the options is purchased for the same underlying asset and each has the same expiration date. Traders employ this strategy when they have a bearish attitude towards the underlying asset and expect its price to fall. This strategy generates limited losses along with limited gains.
Options trading can be complicated using strategies or it can be a simple journey based on your view of the market movement. Use Insta Trade by Angel One and have all the information you need on the same screen and start trading in options in a simplified manner. Download the Angel One app and try out Insta Trade for a better experience on your smartphone today.
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