hOW OPTION STRATEGIES CAN HELP YOU POST GAIN FROM STOCKS IN VOLATILITY
iN TIMES LIKE THEESE WHEN EVERY THING IN STOCK MARKET IS UNPREDICATBLES,SEVERAL STOCKS ARE ABLE HOLD ON TO THEIR OLD CHART PATTERN WHILE OTHERS ARE MAKING ROOM FOR NEW TRENDS FOR THEMSELVES, AND i AM PRETTY SURE THEY SHOULD BE SHOWN UP IN NEXT FEW MONTHS GRAPHS.
But again thanks to other portfolio patterns like balance sheet,profit and loss one can still make money keeping the above in mind from the option market. Here, we are covering some populer strategies in this round up,make sure you keep up. this mainly covers how they work andthe typical mistakes you as normal investor make while utilizing the strategies, and also how to avoid them.
It means buyig a call option with a long option with a intrest on the carryover to the next day and so on.
The application process= If you predict a upward movement signifcantly by the time the option expires.
PROFIT LOSS AND BREAKEVE Here there is a room for unlimited profit upward while you cut your loss by putting a stop loss by paying premium. Breakeven happens when stock reaches its target or undelying price that is equal to the strike price plus the primuim paid.
Tim decay and volatility. the option value would flal as each day passes which could result in a loss, the value of option here rises and falls with the volatilty in the stock market.
TYPICAL COMMON MISTAKES
Buy a call only you are sure that the movement of stock would cover the premium you have paid. A mistake that the people make is buying in a call as soon as they feel that the market is bullish. If the implied volatilty is high, one won't be able to make chunks of money as the premium would been high so the volatilty is the thing to consider before buying, or buying out of money (OTM) call option might be chaper but carries a higher risk of expiring worthless.
This stands for selling a put option, this works when you are sure that the market would be stable or rise, the more bullish the view the more in the moneythe sold option should be.
Your profit arelimited to premium you receive the max loss is unlimited the stock price fall below option strike price.breakeven happens whe the underlying stock reaches aprice that is equal to the strike price less the premium received. Here the time decay and volatility reverse factor you get mor e premium as time passes while if the market rise option price goes up volatility while decreases if the volatility fails
Friday, April 13, 2012