Best Stocks for Option Trading in August 2019 – A Trader’s Guide to Profitability

Unleash the Potential of Options: A Strategic Guide to Maximizing Profits

In the dynamic and ever-evolving stock market, option trading emerges as a potent tool for savvy investors seeking to amplify their returns. Unlike conventional stock purchases, where the potential gains and losses are capped at the underlying stock’s price fluctuations, options offer a wider spectrum of possibilities. By understanding and harnessing the power of options, traders can unlock opportunities for substantial profits while mitigating risks.

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As the month of August approaches, traders eagerly anticipate the emerging trends and identify the best stocks for option trading. Meticulous research and analysis are paramount to navigate the market and uncover the stocks poised for substantial gains. This comprehensive guide delves into the intricacies of option trading, unveils the secrets of successful stock selection, and provides actionable strategies for maximizing profitability.

Criteria for Selecting the Best Stocks for Option Trading

1. High Volatility: Stocks with high volatility experience significant price fluctuations, creating ample opportunities for options strategies that profit from large price movements. Traders should seek stocks with a high historical volatility index (HVX).
2. Liquidity: Liquid stocks ensure that options contracts can be easily bought and sold without significant slippage or impact on the option’s price. High trading volume indicates liquidity and reduces execution delays.
3. Earnings Volatility: Companies with volatile quarterly earnings announcements tend to experience significant stock price fluctuations after each earnings release. Trading options around earnings announcements can be lucrative if traders accurately predict the direction of the stock’s price movement.
4. Technical Analysis: Skilled traders utilize technical analysis to identify potential price trends and market patterns. By employing technical indicators such as moving averages, support and resistance levels, traders can uncover potential entry and exit points for profitable option trades.

Recommended Stocks for August 2019

1. Apple (AAPL): The tech giant Apple possesses high volatility and ample liquidity, making it an attractive option for traders seeking large price movements. The company’s strong fundamentals and upcoming product launches suggest further upside potential.
2. Tesla (TSLA): The electric car maker Tesla has consistently exhibited high volatility and momentum in recent months. Its innovative technology and strong growth prospects make it a viable option for those seeking rapid gains.
3. Netflix (NFLX): Netflix’s streaming dominance has resulted in solid price performance and high volatility. With its expanding content library and global reach, Netflix presents opportunities for profitable option trades.
4. Amazon (AMZN): E-commerce giant Amazon boasts high liquidity and steady growth, attracting traders seeking moderate returns. Its vast product offerings and strong financial performance make it a stable option for long-term options strategies.
5. Nike (NKE): Renowned for its brand loyalty and innovative marketing, Nike exhibits moderate volatility and liquidity. Its consistent performance and strong fundamentals make it an ideal stock for conservative options traders.

Strategic Options Trading Techniques

1. Bull Call Spread: Buying a higher-strike call option while simultaneously selling a lower-strike call option creates a bull call spread. This strategy profits from a moderate increase in the underlying stock’s price while limiting potential losses.
2. Bear Put Spread: Selling a higher-strike put option and buying a lower-strike put option forms a bear put spread. This strategy benefits from a moderate decline in the stock’s price while limiting the downside risk.
3. Covered Call: Selling a call option against a stock position is known as a covered call. This strategy generates additional income and limits the potential upside in exchange for reducing the risk of owning the stock outright.
4. Iron Condor: Simultaneously selling a bull call spread and a bear put spread with the same expiration date and similar strike prices is called an iron condor. This strategy profits from a defined range in the stock’s price movement.

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Best Stock For Option Trading In August 2019

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Maximizing Profits and Minimizing Risks

1. Define Risk Tolerance: Understand your risk appetite and trade sizes accordingly. Do not risk more than you can afford to lose.
2. Manage Position Size: Determine an appropriate position size based on your risk tolerance and account balance. Avoid overleveraging your account.
3. Set Stop-Loss Orders: Protect your profits and limit potential losses by setting stop-loss orders at pre-defined levels.
4. Monitor Market Developments: Track stock prices, earnings announcements, and macroeconomic news that may impact the underlying stock and option prices. Adjust strategies based on market conditions.

Disclaimer: Trading options involves substantial risk of loss and is not suitable for all investors. This guide provides general information and strategies and does not constitute financial advice. Always conduct thorough research and consult with a financial professional before making investment decisions.