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Written by Jason Ng
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Sunday, 04 February 2007 |
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Word Count: 723 How Option Trading Profit In Any Market Conditions
All stock market multi millionaires must be able to profit under any kind of
market conditions. If you are able to profit only when stock markets go up, then
you will find it a gargantuan task to ever have any sustainable success, much
less become a stock market millionaire.
Yes! It is possible and easy to profit whether stocks are up, down or sideways
using option trading. If the ability to trade all kinds of market conditions is
the doorway to becoming a stock market millionaire, then option trading would be
the very key.
In this article, I will outline some common ways by which you can profit from
all kinds of markets by option trading. For more free option trading
information, you may wish to visit
www.OptionTradingPedia.com.Simple Option Strategies for Up Markets. Buy Call
Option - You could buy the same number of equivalent stocks for a fraction of
the price using call options and profit when the stock goes up. If the stock
should crash, you will lose only the small amount you put towards buying the
option instead of the whole amount that you would have put towards buying the
stock itself.
Sell Naked Put Option - Instead of buying call options, you could sell short put
options thereby pocketing the entire amount you made on selling the put options
if the stock should go up. Bull Call Spread - A bull call spread consists of
buying call options at the money and selling short out of the money call options
of the same month. The benefit of this strategy is that you profit when the
stock goes up and profit also when the stock stays sideways!
Simple Option Strategies for Down Markets. Buy Put Option - Instead of shorting
stocks and risking a margin call, you could simply buy a put option. Buying a
put option is exactly the same as buying call options except that you profit
when the stock goes down instead of up. Sell Naked Call Option - Instead of
buying put options, you could sell short call options thereby pocketing the
entire amount you made on selling the put options if the stock should go down.
Bear Put Spread - A bear put spread consists of buying put options at the money
and selling short out of the money put options of the same month. The benefit of
this strategy is that you profit when the stock goes down and profit also when
the stock stays sideways!
Simple Option Strategies for UP or DOWN Markets Straddle - A straddle consist of
buying a call option and a put option at the same strike price on the same
stock. This strategy allows you to profit whether the stock moves up or down and
is excellent when you are certain that a stock will move greatly soon but isn't
sure which direction that may be. Strangle - Similar concept to a straddle but
buys out of the money call option and put option instead of at the money ones in
order to reduce the cost of the position.
Simple Option Strategies for Sideways Markets - Covered Call - If you are
holding on to a stock that is moving sideways, you could collect "rental" out of
it by selling the call option of that stock month after month and pocket the
whole amount of the sale should the stock remain sideways.
Short Straddle - Instead of buying call options and put options as described
above in a Straddle, you would sell short them instead. In this way, you create
an option position which profits when the stock remains sideways.
Are you amazed now at how easy it is to profit in any kind of market conditions
by option trading? These are only very few of the many more option trading
strategies that you can use to your specific portfolio needs. To learn more
about what option trading and stock options are for free, please visit
www.OptionTradingPedia.com.
Jason Ng is the Founder of Masters 'O' Equity Asset Management. He is a fund
manager specializing in options trading and his Star Trading System has helped
thousands. For Free Option Trading Knowledge, please visit
www.OptionTradingPedia.com .
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