Being an investor in the stock market, everyone would choose to invest in stocks that have less risk exposure. Here is where, an investor should beware of the various options strategies that help the investor to manage risks and enhance returns. Unlike Futures, options trading is asymmetric and the buyer would enjoy limited risk and unlimited return potential.
However, in this blog we’ll be discussing the top five options trading strategies that would be helpful for an investor to reduce the risk exposure and gain exceptional returns for your investment.
TOP 5 OPTIONS TRADING STRATEGIES:
- PROTECTIVE PUT STRATEGY:
Protective put is an effective risk management strategy using options contract. An investor implementing the protective put strategy guards against the loss in a stock or other assets. Protective put strategy also offers downside protection in the event price of the asset declines.
- COVERED CALL STRATEGY:
The covered call option strategy is used to generate income in the form of options premiums. This options strategy involves selling call options that have the right options to buy against stocks. In covered call options, you can also generate additional income from the shares.
- BUTTERFLY STRATEGY:
The butterfly options strategy is a non-directional option strategy with limited risk and has higher potential to earn limited future based on the volatility of future underlying assets. The butterfly strategy combines protective and covered call strategy to reduce the net cost of the put option purchased.
- BULL CALL SPREAD STRATEGY:
The bull call spread strategy is used when the investor is moderately bullish on the stock. In this strategy, you can buy the call option of a lower strike and sell the same stock at the higher strike. A bull call spread is designed to benefit from a stocks limited increase in price.
- LONG STRANGLE STRATEGY:
In long-strangle strategy, the investor would buy an out of the money call and an out of the money option. The price of the call option is comparatively higher than the put options assets. This option strategy is a high cost strategy and must be used only when you are confident of a large move.
OPT TO IMPLEMENT OPTIONS TRADING:
As an investor you can opt to invest in the options strategies as they possess less risk and higher return potential. Therefore, while choosing the option contracts, an investor must analyze whether the stocks fulfills the requirements to meet the financial goals.
If you’re in need of a market expert, who could guide you wisely in option contract, then it’s time to meet Goodwill. Goodwill is recognised as one of the best brokerage firms in India that offers expert strategies to its valuable investors at the lowest brokerage fee with exceptional customer support and live training sessions. Click here to Open your free DEMAT Account with Goodwill today!
For more info, visit the official website of Goodwill or make a call on +91 80122 78000 to trade your stocks smartly and efficiently. Stay connected with Goodwill’s Facebook Page and get instant live updates on your stocks.