Options trading like other investment types can be risky. However, it is not as hard to explore as other people may think. All you need is proper foundation to know the basics and patience to learn.
Read the tips below to know how you can double your investment via trading options.
- Read and research. If you are a newbie to options trading, start reading about it on books or online. There are several resources available for you to start reading on. Understanding the terminologies and how things work is the first step into knowing how to earn big.
- Have a strategy. As you start reading on options trading, you will get to know different strategies that people use. Choose one that best suits you and the current state of the market. For instance, if the market is currently stable but in a low economic fluctuation, you may consider the iron condor strategy. What is important is that the one you choose should be a strategy that you identify and are comfortable with.
- Know when the options expire. Usually, the options expire every 3rd Friday of the month. This is when you need to start the trade and you will then have a month to invest.
- Choose an investment option and start trading. If you are set on doing an iron condor strategy, the index fund is probably the top option. Now, as you place your trade in an index fund, you will need to sell both the call and the put in order to earn. The next thing for you to do is pray that the index fund price keeps within the call and the put price range. If you invest $100, you can double this without even shedding money aside from some transaction charges.
- Strategy is the key. If you are able to sell your call and put when the strike prices are just right, then you are in luck. The range between the call and put should not be too wide or too thin.
- Invest even if the market is going down. For some investors, this is actually the best time to buy stocks and invest, as the prices are all down. As they say, where else to go if you’re down than up.
- If you are not up for risk, play it safe. If you prefer the slowly but surely route, then invest on a stable and diversified company. Your investment may double in time, but you need enough patience to wait for this to happen.
- Though it is possible to double your money in options trading, it should not cause you to rush things. You need to understand fully what you are getting into and the consequences. Trading can vary depending on market situation, and you have to be prepared how to handle it.
Make sure you understand the market and the basics of investment first. Read on it from books or research over the Internet. If possible, also attend short introductory talks on options trading or basic trading for starters to learn more.