Consider Whether Options are Right for You Simple Scalps One of the simplest options trading strategiesscalping, typically takes a privileged market position to be consistently profitable.
You must also be an extremely disciplined trader with a good understanding of the market and a solid internet connection. The following trades could take place over the space of seconds or even a second.
Scalping is all about taking a little bit of profit with high-frequency trades, when possible, and giving the market no time to move significantly against you.
You enjoy a While your gains may be lower in this scenario, your losses when buying the put option are limited to the premium initially paid, which is not the case with example of option trading short stock position.
Profit from Portfolio Protection Check out a few more examples. You do not want to sell your shares and take on the tax liability. The 5 options expire worthless and the options are not exercised.
If the stock had instead declined in value, you would have had your losses buffered by the premium you received for selling the covered calls. Playing Example of option trading Sides of the Fence Learn more about buying a straddle and selling an iron condor below. You set up an iron condor to take advantage of the net neutral movement.
All of the options have the same expiration date. All 4 options expire worthless. Using Synthetics One more example!
You think the price will go up, but you want to receive the dividends while protecting your downside if another market crash occurs.