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Stock Option Charts - Option Trading Strategy - Stock Options Software 156 |
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Written by Webmaster
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Wednesday, 17 September 2008 |
By optionstradingdomain
 The effect ofthis would be to provide you with a little extra premium tocover more downside risk. While it is true that the at-the-money option has the mostamount of extrinsic value, it might not always be the idealoption to sell in every situation. For example: write the XYZ June 30 Put and also write the XYZ June 30 call. For example, say the United States Presidential Election will occur in the next month and you want to find a way to profit. The straddle strategy is an option strategy that's based on buying both a call and put of a stock. How to choose the Strike Price?The strike prices used will depend on how bearish an investor is. If you just bought a one-sided option, and the price goes the wrong way, you're looking at possibly losing your entire premium investment. If you would like to learn more about Option Trading Strategies please visit - Conservative Options or just type in Usually this strategy is used when an investor has profited from a decrease in the value of a stock and
wants to lock in their profit. They do not understand that options are on a higher, more sophisticated level when compared to stocks. As long as the price of Google (GOOG) at expiration in one month is trading above ($500 (15 + 16) = $469) and below ($500 + (15 + 16) = $531) you have made a profit. Strike price is the price where an underlying stock can be purchased. 2) Short Combination (Short Strangle): This strategy is similar to the Short Straddle as you write a call and a put option; however, the difference is that with a short combination you use different strike prices. Furthermore, the closer it is to the expiration date, the cheaper premiums are. To be conservative you write put options with a strike price at the money ($120) for $6 each and an expiry in 1 month. After all, if that was possible, how could anyone ever lose any money in the market? And if nobody loses, then how can someone else gain? The whole stock market would collapse. There are 5 common Neutral Market Option Strategies implemented by investors: Short Straddle, Short Combination, Long Straddle, Long Combination, and Time Spread. If you were to short the stock you need to be able to cover you position. The $65 Call is now $7 In-The-Money and its premium is now $8.00. If you were to short the stock you need to be able to cover you position. When to use a Long Combination: An investor feels a stock will make a large price move but is unsure of the direction.For example: buy XYZ June 20 Puts and buy XYZ June 30 Calls. When youown a stock and intend to hold it for a period of time, you areaware that you will probably be holding it while it goes up andwhile it goes down. If, over the life of the contract, the asset value decreases, the buyer can simply elect not to exercise his/her right to buy/sell the asset.
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Last Updated ( Wednesday, 17 September 2008 )
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