Option Trading tips :-
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Friends, Welcome to all of you, on our wonderful website. Friends, by the way you know, we bring stock market related articles for you on this website.
In the same way today in this article we will tell you Best 5 Option Trading tips..
So let’s start Friends, today’s beautiful article.
Option Trading Tips :-
To be successful in options trading, one must be aware of the options trading basics, the strategies to be used and the rules of trading.
Now many traders are confused about how to do options trading and get scared in the beginning considering its complexities, but if used properly, option trading tips can increase your profits manifold. .
Tip 1: Know the Purpose of Trading Options :-
Whether investing or trading in the stock market, it is important to enter with the right purpose. Now if you are looking to trade in options, then it becomes very important to understand here that we understand the need and purpose of our trading.
Now if we understand the meaning of option trading, then the buyer pays a premium amount for taking a position in the market. Now if the market expires according to the buyer, they make a profit but on the contrary they lose the entire premium.
In such a situation, it is very important that you assess your goals and risks properly before entering the market.
For example, you are trading options to make profits from a bullish or bearish market or you are trading options to hedge your trading position.
While option trading brings an opportunity to the seller to earn premium from the premium, on the other hand it provides an option to the buyer to hedge his position so that he can reduce his trading risk.
So in a way, option works differently for buyer and seller and hence it becomes very necessary to trade in it after determining your objective.
If you want to do intraday trading in options, then for that know the volatility and risk of the market because the risk in both these trades is manifold.
Tip 2: Understand your risk and calculate returns accordingly :-
Believe it or not, options trading allows you to make more profits with less risk, which means you can make trades where you have a 50% chance of being profitable when trading stocks, while reducing your risk in options. Taxes can make options more profitable than stocks.
By following the options trading tips here, if you trade with the right type of option trading (call and put option in hindi), right strategy and managing the risk, then you can earn profit even in bullish, bearish or stable market.
But still, for a right trade, you need to be aware of your risk appetite and its accompanying return ratio. For example, if you are an aggressive trader and want to do option writing or buy high volumes, then deep OTM can be beneficial for you.
Whatever option strategy you choose, pay attention to it that you trade in it only after assessing all the things.
Tip 3: Make profits in every market situation with the right strategy
Warren Buffett said, “When people are afraid you are greedy, and when people are greedy you are afraid.” This proverb can be used to find the most profitable trades. There are times when the outlook for the stock is extremely gloomy and there are opportunities for options traders to make huge profits.
You must have seen at the time of COVID that when the market crashed very badly and everyone was scared, then on the other hand there were some option traders who made so much money during the same time that they would not have made profit in the whole year.
And when the market was at its bottom all people were selling their holdings out of fear and on the other hand some people were buying heavily. And then now you can see where the market is now.
So when people are scared, that’s the chance to do something big.
We have all seen that stocks rise and fall on news reports, market noise etc – attractive profits can be expected from being able to exercise options during such events where greed and fear can be seen by savvy traders. Need to recognize the opportunity. Being prepared to take advantage of market volatility is an asset that an experienced trader knows how to use.
You will not always be on the profit side, but nothing can stop you from becoming a successful options trader if you constantly look for the right opportunities. And trading is a long game so shift your focus from “gambling” to becoming a successful trader.
Tip 4: Monitor the volatility of the option :-
Implied Volatility which helps in knowing the volatility of the option, you should be fully aware of it and step into the option trade. For this you can compare the implied volatility of the stock with the historical volatility.
With its proper analysis, you can know what trend can be seen in the stock or index going forward. The high implied volatility increases the premium very quickly so that you can earn manifold profits by selling the option at the right time.
On the other hand, low implied volatility allows you to buy the option with a much lower premium so that a buyer can profit from options trading.
Tip 5: Be aware of country and company events :-
Next is option trading tips, in which it is very important for a trader to always be aware of the events happening in the market or stock as they affect the options market in many ways.
Now here the meaning of market level event can be related to economy, election or other global issue, on the other hand stock event can be annual or quarterly report of any company, new product coming into the market etc.
Now in such a situation, there is a lot of impact on the implied volatility and stock price in the options market, which can be taken advantage of by the traders.
So to make profits in options, you have to identify the right opportunities and events that will affect the options contracts and trade them according to the right expiry and time frame. If you are new to the market, then know what is the expiry in the stock market and what is its importance in the option.
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