If you are looking to add options trading to your investment portfolio, you should know some options trading strategies to boost your chances of profiting from options trading. Learn some of the options trading strategies below to consider utilizing them in your options trading.
Covered Call
One of the noted options trading strategies is using a covered call, also known as a buy-write. This strategy can produce income and protect you to an extent of being long on the stock alone. The trade-off comes in that you have to be willing to sell your shares at a set price, known as the short strike price.
To execute this strategy, you need to buy shares in a stock while, at the same time, writing or selling a call option on those same shares. This strategy is often best used when investors have a short-term position in the stock itself and think the price will remain stable. An investor can make money through selling the call premium or protect against the stock’s value falling off suddenly through this strategy.
Married Put
This strategy involves an investor buying shares in a stock as well as buying put options for the same number of shares. This strategy is best used to protect an investor’s downside risk when holding stock shares, as the protective put will establish a price floor to where the stock can be sold even if the price of that stock falls sharply and suddenly. The downside to this strategy is if the stock price does not decline; in this case, the investor will lose the premium they paid for the put option.
