Low-risk option strategies that can be good for beginners

For anyone new to trading in stocks, options might appear to be something quite puzzling. Options are only a variant of stock trading that allow option holders to trade it at a pre-determined price. However, it is not any simple investment like buying and selling equities and requires a good understanding of the subject with blog outreach. The trading fundamentals of options and stocks are almost the same, but options are entirely different from stocks because these are contracts and naturally come with a validity period. Depending on the type of choice and the market in which it is traded, the validity can be for days, weeks or months. Options, unlike stocks, give the opportunity of investing in assets indirectly and many investors prefer it.

Options are very good in generating some monthly income with minimum risks provided you have the right PSW – option strategies pdf in place. If you want to protect your portfolio, choosing options will help to leverage your investment potential with lesser risk. In this article, we will discuss some options strategies that you can try out.

Bull call spread

As the name of the strategy indicates, the investor should be able to make some money by buying call options at a specific strike price and at the same time sell an equal number of call options for a higher strike price. Make sure that both options have the same underlying asset and the same validity period. This vertical spread strategy suits a bullish investor who expects a moderate price rise of the underlying assets.

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Bear Put Spread

Like the bull call spread, the strategy of Bear Put Spread is also a spread strategy that is vertical in which the investor engages in two simultaneous trading activities – purchase put options at a decided strike price and sell put options of the same number at a lower strike price. The asset related to both transactions must be the same and have the same expiration date.

Married Put

The Married Put strategy revolves around an investor owning an asset like shares or buying it who also buys a put option for the same number of shares. This strategy is suitable for investors who are bullish about the asset price and want to protect themselves from possible short-term losses. The strategy helps to cover the risk from losses should there be any dramatic slide in the asset price.

Butterfly spread

In a departure from the trend of combining two different contracts or positions in the strategy, the Butterfly Spread strategy requires that an investor will use a hybrid model of bull spread and bear spread strategies by using different strike prices. A typical Butterfly Spread strategy would entail buying one call or put option at the lowest or highest strike price and selling two calls or put options at a higher or lower strike price and then again selling one last call or put option at a strike price that is even higher or lower.

Strategies are at the core of trading in options, and you must learn how to create effective options strategies.