Introduction
Have you ever wondered how to make money in the stock market without investing a lot of money? If so, then you might want to consider trading options. Options trading is a derivative trading strategy that gives you the right to buy or sell a stock at a specific price on or before a certain date. It is a great way to generate income and hedge against risk. In this article, we will discuss some short-term options trading strategies for beginners.
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Understanding Options Basics
An option is a contract that gives the buyer the right but not the obligation to buy (in the case of a call option) or sell (in the case of a put option) the underlying asset at a specified price (the strike price) on or before a specified date (the expiration date). The buyer of an option pays a premium to the seller of the option in exchange for this right.
There are two main types of options: calls and puts. A call option gives the buyer the right to buy the underlying asset at the strike price, while a put option gives the buyer the right to sell the underlying asset at the strike price.
Short-Term Trading Strategies
There are a number of short-term options trading strategies that beginners can use. Some of the most popular strategies include:
- The naked call option strategy is a bullish strategy that involves selling a naked call option (i.e., selling a call option without owning the underlying asset). The trader profits if the stock price stays below the strike price minus the premium received.
- The naked put option strategy is a bearish strategy that involves selling a naked put option (i.e., selling a put option without owning the underlying asset). The trader profits if the stock price stays above the strike price minus the premium received.
- The covered call option strategy is a bullish strategy that involves selling a covered call option (i.e., selling a call option while owning the underlying asset). The trader profits if the stock price stays below the strike price minus the premium received.
- The cash-covered put option strategy is a neutral strategy that involves selling a cash-covered put option (i.e., selling a put option while having the cash to buy the underlying asset in case it is assigned). The trader profits if the stock price stays above the strike price minus the premium received.
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Make Money Trading Options Short-Term Strategies For Beginners
Conclusion
Options trading can be a great way to generate income and hedge against risk. However, it is important to remember that options trading is a complex and risky strategy. Before you start trading options, it is important to learn the basics of options and to have a clear understanding of the risks involved. If you are not comfortable trading options on your own, you can consider working with a financial advisor.
