.: A Sample Option Trading Strategy
By:Casey Yew
Category:Home / Finance / Stock Market Investing
When you feel you understand a bit about the Options Trading Market, and are ready to give it a try, you need to spend a bit of time developing a strategy to guide your investment decision. It is important in doing this to understand the basic difference between a strategic decision and a tactical decision.
Your trading strategy is your overall plan. It is the guide. The tactical decisions are the day by day, or even trade by trade method you use to execute your overall strategy. Do not make your strategy overly restrictive and inflexible. It is also important to not let a small set back turn you from your strategy. When your plan is well thought out, it deserves a fair chance to succeed. It is a good idea to include a time frame in your strategic planning. When the time frame expires, is the time to stop and do a complete evaluation of how well or how poorly your strategy fared.
Let's look at a sample strategy.
The first consideration is the amount of available investment capital that is going to be allocated to my options trading plan. Since options tend to carry risk, it makes sense to restrict this amount to what is called risk capital. In other words, I am going to only use money that I can afford to lose. My rent money is exempt under this approach, and will not be used no matter how great the temptation. The plan will be to restrict my investment in options to no more than 20% of my total investment capital.
Next, I will consider a specific target investment. In this sample, it will be finding options with the lowest possible cost. My main concern will be the low cost of the option contract regardless of the type of underlying involved. It will not matter either if the contract is a call or a put. My idea will be both to spread my investment over a larger number of contracts, and limit my losses in the case of any individual one failing to reach the strike price. The idea will be that with a smaller price, the potential profit will be larger and my leverage will be maximized.
Last of all, I am going to stick with my plan for a period of six months to give it a fair chance, and after this period, I will subject the whole idea to a very complete analysis to determine how well it succeeded, or failed. To prepare for this evaluation, very detailed and accurate records will be kept for all transactions. My online options trading broker will more than likely have most of those records saved for me, but I will make sure that this is so, and supplement them with any that I might think necessary.
The above is just an example of how a personal investment strategy might be devised and structured. It was flexible and it considered risk reduction. It allowed ample time to give it a fair chance to succeed. It did not overly hamper my day to day, or tactical investment decisions. Most important, it was my own. There are plenty of people and plenty of websites available to give you advice. Everyone will have their own idea of what will work and what will not work. Listen to them as much as you want, but in the end find the strategy that works for you.
Article keywords: Option Trading Strategy
Article Source: http://www.articles32.com
Among the Many Investment Opportunities that Exist, Option Trading Stands as Both One of the Most Exciting and Risky as well as One that Offers Some of the Best Chances for a Substantial Return. Learn Options Trading Basics, Strategies and Pricing here at http://www.option-trading-fortune.com
.: New Stock Market Investing Articles
1). Difference Between Paper Trading And Live Trading!
Both paper trading and live trading are important steps to accumulate wealth through stock investments.
2). Stock Index Funds - What Is An Index Fund?
You may have heard of the term before, financial indexes, but just what exactly are they. Indexes, also known as stock market indexes, are the listings of stocks and any statistics that show a full of value of any given stock in the index. These indexes are generally used to show the character of all the stocks taken together.
3). Stocks - How To Know When To Sell
Stocks can be a great investment. Most people don`t really know when it`s time to sell though.
4). Some Fundamentals of Option Trading
Option trading is an ever increasingly popular form of investment. The wide spread use of online option trading has led to many newcomers to these risky, but potentially profitable opportunities. The following is a review of some of the fundamentals of Option Trading.
5). Future Option Trading - A Brief History and Overview
Future Option Trading is similar to the Stock Options Trading in many ways, but there are also some major differences. Some of the terminology used in Futures Trading also has a different meaning than the same term when applied to Stock Option Trading, and caution must be used to avoid confusion.
6). A Sample Option Trading Strategy
When you feel you understand a bit about the Options Trading Market, and are ready to give it a try, you need to spend a bit of time developing a strategy to guide your investment decision. It is important in doing this to understand the basic difference between a strategic decision and a tactical decision.
7). Fibonacci and Golden Ratio
The Fibonacci numbers Golden ratio can be used to describe the proportions of everything from nature to smallest building blocks. This is used by many successful investors to pick trends in the charts.
.: Top Stock Market Investing Articles
1). James Dines Predicts a Buying Panic in Uranium
Over the years, Dines successfully forecast the Internet mania, forecasting the giants of the tech boom, and forecasting the tech bust. A gold bug again, Dines also added uranium as the metal to watch over the coming years, saying, “This is my way of playing the whole coming energy boom."
Interviewer: You have been calling a bull market in uranium and, once again, you were the first voice in the now-growing crowd of uranium bulls.
2). Interesting Historical Facts About The Stock Market
Did you know that the 1987 crash was worse than the 1929 crash?
3). Openwave-Could the little company ever become king?
Openwave has a very unique and valuable business in the wireless data market. It has a dominate market share of 50% in both the browser and in the gateway transitions for mobile phones. Both products are a core element in the data cell phone market.
Our philosophy is to own the critical elements in markets that appear to have revolutionary growth. In January 2004 we wrote an article saying the wireless revolution has begun.
4). A Man Who Turned a $15,000 Stock Account INTO $3,296,000 Million AND WHAT I Learned From It
The lessons I learned from a trader who turned a $15,000 account into over $3 Million with JUST two stock trades.
5). Option Trading Tip - Buy Deep In-The-Money Options
Time decay and volatility are responsible for many a broken option trading account. Discover how to neutralize these 2 forces and achieve more consistent profits!
6). The Grand Daddy Boom in Uranium
Approaching his 50th year in the uranium business, the quiet but assertive Chairman and Chief Executive of Uranium Resources (OTC BB: URIX). Paul K. Willmott talked to us about the current uranium bull market. Willmott discussed the third uranium bull market he’s experienced with both exuberance and caution.
Interviewer: How do you feel about the rising.
7). Why Is Eric Sprott A Uranium Bull?
Eric Sprott may be Canada's answer to Warren Buffet. He's got the Midas Touch and currently manages more than $3 billion. We talked to Eric Sprott about uranium and why he is bullish on nuclear energy.
Interviewer:
Uranium had been inching higher from 2001 until a year ago. Since then, it has soared up the price chart. What is a realistic price for uranium and how high can you envision it reaching?
Eric Sprott:
There is obviously a shortage between current mine production and current uranium consumption.