option trade
Most people lose money in a bear market. Remember the tech bubble and recession in 2000-2002? This article will on three option trading strategies that you can make big profits in a bear market or recession.
Option Strategy No. 1 – Buying put options
It is quite easy to buy put options. This option trading strategy can be used even in an IRA, provided they have been authorized agent. You want to select a stock, you feel has a good chance of lowering the price. The risk is limited to the cost of the put option. For example, XYZ stock is currently trading at $ 50 per share and buy a put option on XYZ with an expiration date two months later with an exercise price of $ 50. If the stock falls from $ 50 to $ 40, your put option would be worth $ 10 per share.
Option Trading Strategy 2 – Buying Bear Put Spread
The purchase of a spread of sales is a bit more complicated than just buying a put option, but gives you the advantage of reducing cost, but its benefit tapas. Since divergence is characterized by the negotiation of the two the same expiration month put options, buy one at an exercise price determined and the sale of the option selling at a price below the option strike. Want to pick an action you think will be the fall in value. The risk is limited to the costs of propagation of sale. As an example, if you buy the put option listed above, but also sells a put option with an exercise price of $ 45. In this example, if the population decline of $ 40, you gain $ 5 per share (strike price $ 50 – $ 45 price). And while you're doing less per share, savings comes in the fact that the cost of buying the put option open would be much greater than the initial cost of the bear put spread.
Option Trading Strategy 3 – Married Put
The risk can be minimized by using married a put option, which is a strategy coverage. This strategy involves buying a share that you believe will appreciate in value and buying a put option, while minimizing losses due to adverse market movement. You may have heard the saying that there is always a bull market going on somewhere. To benefit from this strategy find out what sectors and values against the grain and appreciate in a bear market. Next buy the stock you chose and protect their investment by buying a put option to limit losses if the stock goes south.
In conclusion, it can still make big profits in the markets down by finding stocks he thinks will fall in price and buying a put option or a bear put spread. Alternatively, you can buy married with a put option on a share in a sector believed to be seen, thus minimizing risk. In addition to purchasing stock options can also be purchased options on exchange-traded funds or index options. Exchange Traded Funds allow you to invest in world markets, commodities and even coins. You may receive a large profit in a falling market. However, it is vital to understanding the details of the strategies of options, choose the correct action, exchange-traded fund or index option, and use proven tactics and begin.
Disclaimer: This article should not be used as financial advice, is for informational purposes only. Be sure to contact your financial advisor before making any investment decision.
About the Author:
Author Biography – John Hart is an accomplished option trader, focusing on developing innovative and unique option trading strategies, approaches and methodologies. For a limited time, you can sign up to his newsletter absolutely free by clicking on this link – option strategies newsletter.
Article Source: ArticlesBase.com – Three Winning Bear Market Option Trading Strategies Revealed
Option Trading – How to Find the Stock – Part 1
