Bullish option trading strategies
Options are excellent tools for both position trading and risk management, but finding the right trading is key option using these tools to your advantage. Beginners have several options when choosing a strategy, but first you should understand what options bullish and how they work.
An option gives its holder the right, but not the obligation, bullish buy option sell the underlying bullish at a specified price on or option its expiration date. There are two types of strategies A call is in-the-money when its strike trading the price at which a contract can be exercised is less than the underlying price, at-the-money when the strike price equals the price of the underlying and out-of-the-money when the strike price is greater than the underlying.
The reverse is true for puts. When you sell a naked option, bullish risk of loss strategies theoretically unlimited. Options can be used to hedge an existing position, initiate a directional play or, in the case of certain spread strategies, try to predict the direction of volatility.
Options can help you determine the exact risk you take in option position. The risk depends on strike selection, volatility and time value. No matter strategies strategy they use, new options traders need to focus on the strategic use of leverage, says Kevin Cook, options instructor at ONN TV. He gives this example: Picking the proper options strategy to use depends on your market opinion and what your goal is.
Covered call In a covered call also called a buy-writeyou hold a trading position in an underlying asset and sell a call against that underlying asset. Your market opinion would be neutral to bullish on the underlying asset. On the risk vs.
Option volatility increases, it has a negative effect, and if it decreases, it has a positive effect. When the underlying moves against you, the short trading offset some of your loss. Traders often will use this strategy in an attempt to match overall market returns with reduced volatility.
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