Category: Options

Why and How Should We Use Covered Call Strategy- The Basics of a Covered Call Option

The popularity of covered call option strategies stems from the fact that they allow traders to hedge their holdings while also possibly generating additional profit. Professional market players imply a covered call strategy to boost investment income. Still, individual investors can benefit from this conservative but effective option strategy by taking the time to learn how it works and when to use it. Let’s take a look at the covered call in this context and see how and why to use the covered call strategy in business! So, let’s get started!

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What is Day Trading and why is there so much interest lately?

In this new world we live in as it relates to the changes Covid-19 has caused, Day Trading is now more popular than ever. With the sudden loss, or even the threat of loss, of someone’s livelihood due to no fault of their own, people have begun looking for alternatives to the new risk involved with employment. Having a way to make a living from your kitchen table every day can be very appealing. Especially with the new realization that a job or business can be snatched away for you without any notice. It can be very empowering to be the master of your own destiny. Becoming a successful Day Trader really fits the bill for many people in this regard.

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Options on stocks vs. options on futures

When I started with options trading, I began with options on futures. The reason for this was that in my very first book about options the author wrote about options on futures. And as I was new to options, it was just a coincidental beginning of mine. But later I found out that the mass of options traders are trading with options on stocks rather than with options on futures. When I noticed this, I was frankly surprised but kept trading options on futures. Meanwhile, I am trading almost only with options on stocks. But not because it’s a better trading in general but just because it’s a more suitable trading for me personally. For all you, folks, who would like to know more about trading with options on futures I wrote this article to give you a first brief overview about it.

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Why you shouldn’t sell naked call options on stocks

When I started trading options, I thought it was more dangerous to sell puts. The reason for this was my conviction that a stock’s price is falling faster than it’s increasing. In general, this statement is not false. But the more experience I gained the more it got clear that actually the call side is the more “dangerous” one.  There are, of course, situations where it’s worth to sell call options on stocks. But in general, selling calls turned out to be riskier than selling puts. In this article, I’ll explain you the reasons for it and also show you situations where it’s nevertheless worthwhile to sell call options.

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Buying options – how to increase the probability of success

In the most cases, options are bought by professional traders for hedging purposes. If you want to make money with options, you should rather sell them than buying them. The reason for this is, that option sellers have statistically a better chance to make money than option buyers. But how does it come? Well, first of all, professional traders usually don’t want to make money buying options. For them, buying options is just a hedging process and they know that they would usually lose money with it. But for them, losing “a bit” of money buying options but get hedged is a much better solution than a total loss. The other ones are private traders hoping to become rich over night buying options by assumption they would insanely increase in their value. But the most private traders have an absolute wrong approach, and that’s why they usually lose money buying options. In this article, I’d like to give you some general information how to increase the probability making profits by buying options. After that, you should get a better understanding whether buying options is a good idea or not.

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