Profitable Options Strategies

www.options-trading-education.com

http://www.options-trading-education.com/





Traders can use a number of

profitable options strategies

depending upon their risk tolerance

and degree of expertise.







Profitable options strategies also

depend upon why one is trading

options in the first place.







Companies that buy and sell

products across the world buy

options to hedge risk.


http://www.options-trading-education.com/6531/buy-options-to-hedge-risk/

http://www.options-trading-education.com/6531/buy-options-to-hedge-risk/






Currency speculators use a range

of profitable options strategies

aimed at enhancing profits while

limiting loss.







First of all let us look at profitable

options strategies from the view

point of risk limitation.







Options in Foreign Currency

Trading







ABC Company in the USA decides

to buy machine parts from a

company in Germany. They will

need to pay in Euros upon delivery

six months hence.







They are concerned that the price

of the Euro will go up versus the

dollar before payment is due. This

would obviously make their

purchase more expensive.







They could simply pay right away

but would rather have the use of

their money for the next six

months.







ABC Company will choose to buy

calls on the Euro for the amount of

the contract.

If the Euro goes up in price they will

execute the contract so that they

can buy Euros at the lower contract

price and not the subsequently

higher spot price.







If the Euro does not go up in price

they will no need to execute the

contract and if the Euro actually

falls in price they will save money

by waiting.







This is one of the profitable options

strategies can foreign currency

traders can use. It is a sound

strategy for hedging risk with

options.


http://www.options-trading-education.com/3287/hedging-risk-with-options/

http://www.options-trading-education.com/3287/hedging-risk-with-options/






Market Speculation with

Options







Often times profitable options

strategies have to do with

speculating in a volatile stock

market.







Let us say that you are interested

in the stock of ABC Company.







The stock price has been bouncing

up and down in a very volatile

market.







You believe that the stock is either

going to go up substantially or fall

precipitously depending upon the

success or failure of a buyout

attempt by a competitor.







In order to profit in either case you

use what is called a long straddle

options strategy. In this case you

buy both a put and a call on ABC

Company, both with the same

expiration date and for the same

strike price.


http://www.options-trading-education.com/183/long-straddle/






Your cost of this strategy is the

price of the two options contracts.

You will profit if the stock price rises

or falls as you will execute the

appropriate contract.







If the stock price simply stays put

your loss will be limited to the price

of the contracts.







Adding a Little Profit to Your

Investment Portfolio







Investors who own a given stock

can often profit from selling calls on

the stock.


http://www.options-trading-education.com/6548/profit-from-selling-calls/






If you correctly believe that ABC

Company is at the top of its current

trading range you can sell calls on

the stock.







You will receive the price of the

options contract, like getting an

extra dividend. Providing that your

judgment is sound you will keep the

stock because the price will not

rise.







The worst that could happen is that

you would miss out on an

unexpected jump in the stock price

as the buyer of the option would

execute the contract and buy the

stock at the contract price.







With good technical and

fundamental analysis of stock one

of the more profitable options

strategies for an investor is to profit

from selling calls on a stock that

your own.







www.Options-Trading-Education.com






Profitable Options Strategies

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