http://www.ForexAutopilotRobot.com – FREE Day Trading Strategies to Consider – Even if you’re new to options trading, you’re probably already familiar with buying puts and calls. These are the two most basic options strategies and the ones that rookie options traders gravitate to. That makes sense. Puts and calls are low-risk and easy to understand. Buy a put and you want the underlying security to go down in value. Purchase a call and you’re cheering for the underlying security to rise. Either way, you’re risk exposure is limited to the premium you pay to buy the contract. If the contract expires worthless, you lose nothing more than the cost of the contract.
To that end, we’re definitely fans of buying puts and calls, no matter what your level of options experience is. The potential for explosive returns without the need for betting the farm on each trade is unrivaled in the investing world. But we’re also fans of broadening our horizons and investing in options is one of the best places to do this. With so many different options strategies, there’s literally always a way to make a profit. Let’s look at the top 10 options strategies.
1. The Covered Call
Writing options means we are sellers of an options contract, which can be risky under some circumstances, but not with covered calls. In fact, covered call writing is probably the most conservative options-writing strategy because the contract you write is backed by your ownership of the underlying stock.
Let’s say you own 500 shares of a highly liquid blue chip stock like Microsoft. Microsoft isn’t very volatile and that makes it an ideal candidate for covered call writing. It’s a good idea to write calls on stocks that aren’t very volatile because we’re going to write out-of-the-money calls and collect some income in the form of a premium for doing so. Say Microsoft is trading at $23. We might write calls on the $25 strike for the next month’s contract. The risk here is that if the underlying stock rises above the strike price before expiration, the …
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