Help Concerning Options Trading Strategies

For investors new to options, there is a lot to learn. Besides the various factors that affect option pricing directly, you will need to learn a new set of terms that apply only to options trading, a new set of trading symbols to follow, and of course, how to specifically place options trades with your broker, whether online or by phone. Then there are money management and risk tolerance factors. All of these things will need to be taken into account when determining the best options trading strategies for you as an individual.

Generally, options trading involves the buying and selling of calls and puts. A call is the right to buy a certain number of shares of a stock at a specified price within a certain period of time, and put is the right to sell a certain number of shares of stock at a specified price within a certain period of time. These are the underlying financial instruments behind all options strategies.

Options trading is considered a zero-sum game. This means that if you have a winning trade, someone else has a losing trade of equal value. It's not necessarily an exact one-to-one match by trader, but at the end of the trading day, all winning trades must equal all losing trades. For this reason, it's very important to understand that buyers and sellers have very different options strategies.

Some strategies are very simple - selling covered calls means you own stock and you sell call options against it. But there are very advanced options strategies as well, with such esoteric names as Bull Calendar Price Spread with Calls, Leveraged Buy Writing, Leveraged Put Writing, Synthetic Long Stock Buy Write, Leveraged Short Strangle, and many others.

Before stepping into the options trading arena, you would be advised to understand each of these options strategies thoroughly. If you think it is too complicated, test drive Options University for risk-free.

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