Work with options strategy. 28 Option Strategies for All Options Traders - Option Strategies Insider
Option buyers are charged an amount called a "premium" by the sellers for such a right. In trading for dummies, option sellers option writers assume greater risk than the option buyers, which is why they demand this premium.
Options are divided into "call" and "put" options. There are some advantages to trading options.
The following are basic option strategies for beginners. Potential profit is unlimited, as the option payoff will increase along with the underlying asset price until expiration, and there is theoretically no limit to how high it can go.
With a put option, if the underlying rises past the option's strike price, the option will simply expire worthlessly.
In exchange for this risk, a covered call strategy provides limited downside protection in the form of premium received when selling the call option.
A protective put is a long put, like the strategy we discussed above; however, the goal, as the name implies, is downside protection versus attempting work with options strategy profit from a downside move.
Choosing the right strategy
If a trader owns shares that he or she is bullish on in the long run but wants to protect against a decline in the short run, they may purchase a protective put. Hence, the position can effectively be thought of as an insurance strategy.
The trader can set the strike price below the current price to reduce premium payment at the expense of decreasing downside protection. This can be thought of as deductible insurance.
Long Call The Strategy A long call gives you the right to buy the underlying stock at strike price A. Calls may be used as an alternative to buying stock outright. You can profit if the stock rises, without taking on all of the downside risk that would result from owning the stock. It is also possible to gain leverage over a greater number of shares than you could afford to buy outright because calls are always less expensive than the stock itself. But be careful, especially with short-term out-of-the-money calls.
The following put options are available: June options.