Different Option Strategies
1. Buying short term options. This can be beneficial if you believe that a stock is going to make a big move in the near future. This strategy is not for the long term but seeks to take advantage of sudden market swings. 2. Buying Leaps. Unlike short term options the leap can take advantage of the longer term prospective on a stock. Because a leap is normally one to two years out you would have a long term perspective with the power of leverage on your side as well. 3. Selling short term options. This strategy tries to capture a consistent income from the market by Selling out of the money options and collecting the premium. As long as the stock does not go past the strike price of the option the option will expire worthless and the seller would walk away with the premium. 4. Selling covered calls. This is similar to selling short term options. There are only two major differences. The first one is that you are limited to only selling call. The second is you buy the stock first so that if the stock goes above your strike price and you have to sell you do not have to buy the stock at a higher price and sell it at the option strike price. You already have the stock so you will just sell the stock you already own. 5. Forming a diagonal spread. This is similar to the covered call strategy. The only difference is that you buy the leap or the right to buy a stock at a given price and sell short term calls. If you get called out you can buy the stock with the leap and sell it. It you don’t get called out you get to keep the option premium plus and appreciation in the leap.
|
