Learn to Trade Options: Options Strategies for Beginners

Breaking down options strategies with options guru, Bernie Schaeffer

Dec 12, 2020 at 10:00 AM
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    Options strategies are great tools for diversification of your options trading portfolio. Diversification means that a traders includes a variety of options buying and options selling strategies as tools for protecting and growing his portfolio. As a beginner cruising through a long list of options strategies, you may find it difficult and overwhelming to navigate all of the options. Schaeffer's Investment Research, the best options newsletter publishers in the world, can help you.

    Choosing from strategies suitable for bullish markets, bearish markets, high volatility, sideways, and unknown environments and then following the strategy for optimization can prove to be quite a task. It is especially important to make an informed decision about which options strategies to include in your trading portfolio.

    It is critical to start with identifying your goal with options trading. Once a goal is defined, only some of the strategies will be suitable for your desired approach to portfolio growth. In this article, we have compiled a brief overview of the best and easiest-to-execute options trading strategies for beginners.

    In addition to defining a strategy, we strongly recommend that you go beyond this overview and consider subscribing to the best options newsletters available on the market. Options newsletters will grant you access to expertly timed trade recommendations, regular deep-dives into the background of each trade, and insights into the current options trading environment.

    Here are some of the most suitable options trading strategies for beginners:

    Long Calls / Buying Calls

    If you want to limit the risk and make the most of anticipated increasing prices, this options strategy is for you. With its unlimited profit potential, traders can earn many times their initial investment. On the flip side, the potential loss through a long call strategy is limited to your initial investment. In a long call strategy, the trader expects the stock price to surpass the strike price by the option's expiration date. If your option has yet to expire and you still expect an increase in the stock price ahead of the expiration date, then the long call strategy can prove to be an incredibly advantageous move. The best option newsletters for buying calls will provide you with professional advice on how to go about your long call strategy!

    Long Puts / Buying Puts

    Buying a put option is literally the opposite of buying calls. The trader now expects the stock price at expiration to be less than the current strike price when buying a put. Buying puts allows traders to take advantage of the falling prices in the market while still capping potential losses. Unlike the long call strategy, the potential profit and potential loss are both limited when buying put options. Furthermore, if the stock finishes at or above the strike price, the put contract expires and loses its value. Consider joining the best options newsletter to best navigate the utilization of put buying in your portfolio.

    Covered Calls

    Simply put, the covered call is a much safer strategy than selling a call option. Covered calls can prove to be a beneficial strategy for generating income if you already own the underlying stock and you do not expect any considerable increase in the stock price over the duration of implementing this strategy. A covered call will limit the profit potential, unlike simply buying a call or a put, but will also provide you with downside protection in case you are wrong about the underlying stock price. If the stock price is above the option's strike price at expiration, the owner has to sell it to the buyer at the strike.

    Short Puts / Selling Puts

    When selling a put, the trader expects the stock price to be higher than the purchased strike price at option expiration. This is the opposite of a long put strategy. The trader should ensure that they have sufficient equity to purchase the stock if it is offered to them, requiring a sufficient margin account. This is because, if the stock price is lower than the strike price on the option expiration date, the trader must purchase the stock at the chosen strike price. Scheffer's, the publisher of the best options newsletters, has programs specifically designed around selling puts and taking advantage of low volatility in the underlying that will guide you through the process to profitability.

    Buying Protective Puts

    A protective put is a long put that comes with downside protection. If the underlying stock price is above the strike price at expiration, the protective put expires without value. However, the trader has the advantage of the increased underlying price. On the other hand, if the underlying stock price decreases, the loss on the play is mostly covered by the gain from the put option. Thus, buying protective puts is a particularly good risk-management options trading strategy as it allows for hedging against a short-term decline in share price.

    No matter which options trading strategy matches your current investment goals, subscribing to an options newsletter can prove greatly beneficial to rapidly increasing your learning and providing you with support to become the best options trader possible. The best options newsletters provides not only trades based on proven techniques, but also a complete deep-dive into every trade driver with full transparency for its subscribers.

    Schaeffer's trading programs, including a custom trading handbook for each strategy, all fulfill the criteria and more, offering a comprehensive commentary and easy-to-execute trade recommendations each month. Consulting Schaeffer's, the best options newsletter publisher in the world, will significantly enhance your trading experience. Happy trading!

     

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