Options Trading 101 – Let’s Look At The Four Basic Moves You Can Make

On a very basic level, there are four types of options trades. Yet there are a ton of different options trading strategies out there. You don’t want to bite off more than you can chew right out of the gate. It’s very important to learn just as much about options as you know about investing in general.

The Covered Call

Let’s start with the covered call. This is considered a bearish strategy, but there’s much more to it than that. Whether you are bullish or bearish on a stock, you are providing yourself with some insurance. You can cover your position and limit your losses. Yet in some respects, you can also end up limiting your gains.

Writing a covered call means you are selling a call option. You own the underlying shares, and you agree to sell them at the strike price, if your position ends up in the money. You pocket the premium no matter what. It’s always best to make sure you are writing covered calls on stocks whose premiums are worth the move.

Buying Calls

When you buy a call, you fork over a lot less money, and this money represents the premium you would be pocketing if you were the one selling the covered call. You are in essence controlling 100 shares of stock as well. People who buy calls often trade them within the allotted window of time.

Yet trading call options can be very risky, as they lose money over time if there isn’t a significant movement in the stock. If your call option expires out of the money, it becomes worthless. Buying calls, however, is a popular day trading strategy, and there is money to be made.

Selling Puts

Selling puts is considered a bullish strategy, but it can be looked at with a different perspective, too. Some people sell puts to pocket premiums and allow themselves to purchase stocks they want at a cheaper price. Ideally, however, you’re looking for a stock to surge so that it never gets close to your strike price. You pocket the hefty premium, and you move on.

Selling puts can make you some nice money, but for the most part, you have to post the collateral. There are naked puts, but they are more risky of course. You would have to be cleared by your broker to sell puts as though you were buying calls, meaning you post less money to get the gains.

Buying Puts

Buying puts isn’t the same thing as shorting a stock, but it’s the closest you get to doing so with basic options trading. You make money if a stock goes down. When you buy a put, you control 100 shares at a cheaper price.

You are buying the put because you believe the stock is going to go down in value over some time. You can profit off a put for a stock you believe in, however, so it’s not like you have to think the company is doomed.

Let’s say that a stock has been roaring lately along with the market, but you believe it’s time for a correction. You can make some money if you buy a put at a particular strike price, and that stock falls below your strike price.

Investors love to trade bought calls and puts. Covered calls are more for the income investor. Selling puts is more of a step up for the income investor, but you need to tackle one thing at a time here. You also need a sizable portfolio to get into the options game, meaning you have first learned investing and you have enough money to take on the covered call.

The covered call is where I suggest that you start. You have a portfolio, but do you have 100 shares of a particular company? Look at the call option premiums for those stocks you own. Write a covered call or two, and then I suggest you start looking into selling puts.

Leave buying calls and buying puts off the table for now. Look into those later if you want to take on that type of risk. First, you have to get to know yourself as an options trader. Then you can start making bigger moves.

On a very basic level, there are four types of options trades. Yet there are a ton of different options trading strategies out there. You don’t want to bite off more than you can chew right out of the gate. It’s very important to learn just as much about options as you know about investing […]

How to Succeed in Day Trading

You can make a lot of money in day trading. However, a lot of new traders fail to make money. They end up losing their capital as mentioned here. It is easy to make money trading if you know what you are doing. Learning how to trade takes time and lots of effort.

In this article, you will learn how to succeed in day trading.

Change Your Mindset

The first thing you need to change is your mindset. Most people fail because they have poor mindsets. They just want to try to see if they can make money. So, they give up if they lose their first capital. And they tell everyone that it is not possible to make money trading.

Having a successful mindset increases the chances of making money trading. Promise yourself you will never give in until you make a lot of money trading. If you have this mindset, you will work extra hard to make your goal a reality. You will be more focused. And you will do everything you can to learn to trade successfully.

Choose a Mentor

The second thing you need to do is choose the right mentor. You have made up your mind that you want to make money day trading. However, it is possible to make mistakes that can delay your success. Mentors reduce the learning curve because they only teach proven trading strategies.

To choose the right mentor, talk to their students. The best mentors have a lot of successful students. They have been coaching students for several years. Most of their students succeed. Therefore, choosing the right mentor increases the chance of making a lot of money trading.

Learn Day Trading

Do not rush to trade. Because you do not have any experience. If you cannot afford to hire a mentor or a coach, it is time to learn trading from books and online. A lot of successful traders have written books. You can easily find their books online. Study different trading books if you want to know various trading strategies.

Additionally, there are online trading seminars and workshops, which you can attend at the comfort of your home. Most of these seminars and workshops teach proven trading strategies and they have mindset training, which can help you develop a growth mindset. You can learn trading from different seminars and workshops.

Practice Trading

Practice trading is important. Most people think they can become successful traders just by learning to trade. You can learn different trading strategies. However, if you do not implement what you learn, you will never make any money. It is easy to learn and master proven trading strategies by practicing trading.

There are some may websites, which you can use to test your trading strategies. You get a free account and free paper money to trade with. Testing several trading strategies will help you pick the best trading strategies. You will know the trading strategies that work for you. Use those trading strategies to make money.

Never Give Up

It is easy to give up, especially when you are losing money. A lot of people chase their losses when they are on a losing run. Then, they give up trading if they lose everything. Chasing losses is a bad idea. You must understand that you will lose money on some trades.

This is where having the right mindset is important. You will never give up on day trading if you are 100% committed to making money trading. If you are losing money, change your trading strategies. In fact, it is better to take a break, especially if you are trading online. Taking a break clears your mind.

Support Group

It is easy to get overwhelmed, especially if you are trading online. Because there are so many trades to choose from. And you will spend most of your time alone. Having a support group increases your confidence. You will talk with people who are also working hard to improve their trading strategies. You will exchange ideas with them.

You will not feel alone because you will talk to other traders. They will help you make the right decisions in some cases. If you have questions, they will be happy to answer your questions. Therefore, join online groups and communities, where you will meet and talk with other new day traders.

In conclusion, making money with day trading is possible if you are willing to put in the work.

You can make a lot of money in day trading. However, a lot of new traders fail to make money. They end up losing their capital as mentioned here. It is easy to make money trading if you know what you are doing. Learning how to trade takes time and lots of effort. In this […]