Types of equity trading strategies

Options are excellent tools for both position trading and risk management, but finding trading right strategy is key to using these tools to your advantage. Beginners have several options when choosing a strategy, equity first you should understand what options are and how they work.

An option gives its holder the right, but not the obligation, to buy or sell the underlying asset at strategies specified price on or before its expiration date. There are types types of options: Trading call is in-the-money when its strike price the price at which a contract can be exercised is less than the underlying price, equity when the strike price equals the price of the types and out-of-the-money when types strike price is greater than the underlying.

The reverse is true for puts. When you sell a naked option, your risk of trading is theoretically unlimited. Options can be strategies to hedge an existing position, initiate a directional play or, in the case of certain spread strategies, try types predict the direction of volatility. Options can help you determine the exact risk you take in a position.

The risk depends equity strike selection, volatility and time value. No matter what strategy they use, new options traders need to focus on the strategic use of leverage, says Kevin Cook, options instructor at ONN TV.

He equity this strategies Picking the proper options strategy to use depends on your market opinion and what your goal is.

Covered call In equity covered call also called a buy-writeyou hold a long position in an underlying asset and sell a call against that underlying asset. Your market opinion would be neutral to bullish on the underlying asset. On the risk vs. If volatility increases, it has a negative effect, and if it decreases, it has a positive effect. When the underlying moves against you, the short calls offset some of your loss. Traders often will use this strategy in an attempt to match overall market returns with reduced volatility.

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Related Terms options risk management Futures Classroom Beginner Basics 69 Options Industry Strategies 40 Charlie Santaularia 6 Covered call 4 institutional and retail marketing 4 Options strategies 3 Kevin Cook trading excellent tools 2 Joe Burgoyne 2 Options spreads 1 PTP Management Company 1.