Online options trading can be a very lucrative opportunity for investors to maximize their gains. Developing a sound options trading strategy is one way to take advantage of slight to modest gains or losses in an underlying stock. The normal high volatility of stock options makes them much more attractive to swing traders looking to increase their cash flow. New investors to online options trading must recognize the potential risks and downsides that are also part of starting an options trading strategy.
Instructions
Step1Define your goals and strategy before starting any online options trading. Ask yourself what type of options you would like to trade? Are you interested in day trading options or do you prefer a longer term approach? Keep in mind that all options contracts expire and even if you buy and sell LEAPS, they are usually 2 years or less into the future. The point is that you can’t purchase options long term as you would with a stock.
Step2Research different options trading strategies using online references or by purchasing an options book. Identifying all possible options strategies is very important information to have before you place your first trade. You may want to trade what the market gives you or maybe you are bullish or bearish on a particular stock. Each of these scenarios may use a slightly different process or strategy to maximize your gains.
Step3Open up an account with an online discount broker that will allow you to start online options trading. Be sure to research several discount brokers to ensure the one you pick fits your needs. You will also need to open up an account with special approval to buy and sell options.
Step4Start out with simple online options trading strategies if you are new to this type of trading. These types of strategies could include deep in the money call or put trading, as well as selling covered calls against existing stock positions in your portfolio. These types of simple options trades will give you the experience needed to implement more difficult trading strategies.
Step5Stay in tune with overall market conditions as well as with individual stocks you are screening. You will never make any money with an online options trading program that tries to go against the market. Instead of trading against the market, implement your online options trading strategy to trade what the market gives you.
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