Let’s take a look at some of the most effective beginners trading strategies and try to understand what are the benefits of trading stock options.
Are stock options better than stocks?
Read on for answers!
5 Simple Trading Strategies for Stock Options Beginners
To start, let’s explore the most successful and effective beginner level stock options trading strategies:
To “go long” on a call option means that you buy a call option in the hopes that the underlying stock will increase in value. Your goal is to set a reasonable strike price and buy a call option that will increase in value before the stock option expiration.
This way, you get to keep the difference in the price as profit.
This is a risk minimization strategy that involves “going short” or selling a call option and simultaneously buying 100 shares per option sold. Your hopes are pinned on the underlying stock’s price falling below the strike price.
At expiration, you must sell those stocks to the buyer of the call option at the strike price.
Here, you buy a put option in hopes that the stock price dips below the strike price at expiration. You can keep the difference as your profit.
This is the exact opposite of the previous move. In this case, you sell a put option and hope for the stock’s price to swell above and beyond the strike price.
This is a strategic move involving the same principle as the long put strategy. The only difference is that you also own the stocks for which you’ve bought the put option. This way, if the stock price increases, you can minimize your losses.
Now that you’ve walked through the several options available to newbies, you may be asking yourself: are stock options risky?
Well, yes — all investments carry risks.
There is no such thing as a risk-free investment!
Your goal is to always minimize the risk factor when investing.
What Are Stock Options and How Do They Work for Beginners?
Stock options, both call and put, allow trades of underlying stocks at given strike prices. All the day trading stock options strategies that we’ve discussed earlier, involve both call and put options.
Since options can increase and decrease in value very swiftly, you must know how to pick stock options as beginner before starting.
How to Trade Using EMA — A Comprehensive Guide for Traders
Traders don’t speculate, they judge. Indicators like EMA, or exponential moving average, are an essential part of any “how to options trade for beginners” course. EMA is like an overlay chart that shows you when it is ideal to enter or exit a trade. Our EMA Cloud Trading Indicator is a great way to start this Journey, check it out HERE
You can set it up with just one click/tap with software for trading stock options for beginners.
Understanding the Pros and Cons of Trading for Beginners
Is option trading good for beginners?
We’ll let you be the judge, here are the pros and cons of stock trading options beginners:
- You can earn big
- Be your own boss — work for no one
- Employ a ton of different strategies
- Get instant results for your efforts
- You need money to get started, and lots of it
- All trades must be backed by research
- Losses can be rather big
Common Mistakes to Avoid When Trading Stock for Beginners
This pretty much concludes this short 101 beginners guide to options trading. But before you leave, here are some last-minute stock option tips to help you avoid common pitfalls in trading:
- Never enter an investment/trade without fully understanding it
- Don’t just fall in love with a stock, your goal is to trade for profit
- Always be patient, and never try to rush things
- Don’t time the market
- Never wait to exit a profitable trade in hopes of making up for past losses
- Don’t put off diversifying
- Never let your emotions make the last call