Categories: Position Trading

Options Trading Strategy for a 50% Return and Downside Protection

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The options trading strategy I use to lock in a double-digit cash return on my investment and total returns up to 50% in a year. Most investors think stock options are too risky or complicated but I’m revealing a covered call strategy that could really boost your portfolio.

I’ll walk you through options trading examples and help you understand exactly how to use call options in your portfolio. Then I’ll reveal the options strategy I’m using on two stocks in which I just invested $25,000 and could net me more than $10,000 in profits.

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The covered call options strategy isn’t just for making those double-digit returns. I also use it to limit my downside risk on my portfolio. If I’m holding a stock that worries me for near-term returns, I can sell call options against it to collect a huge cash reward. I lock in a cash return and lower the price I pay on the shares.

Stock options can be confusing so I want you to watch through the entire video. I’ll highlight several real life examples and show you how to trade options so you protect your money. I’m always here to answer any questions so make sure you ask them in the comments.

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Joseph Hogue, CFA spent nearly a decade as an investment analyst for institutional firms and banks. He now helps people understand their financial lives through debt payoff strategies, investing and ways to save more money. He has appeared on Bloomberg and on sites like CNBC and Morningstar. He holds the Chartered Financial Analyst (CFA) designation and is a veteran of the Marine Corps.

#optionsinvesting #stockoptions #optionstrading

Position Trading Returns, Options Trading Strategy for a 50% Return and Downside Protection.

What Is Long-Position?

A long position additionally known as simply long is the purchasing of a supply, commodity, or currency with the assumption that it will rise in value. Holding a lengthy position is a bullish sight.

Long position and long are frequently made use of In the context of purchasing a choices contract. The trader can hold either a lengthy phone call or a long put option, relying on the outlook for the underlying property of the option contract.

A capitalist that wants to benefit from an upward price activity in a property will “go long” on a telephone call option. The call provides the owner the option to acquire the underlying property at a certain price.
Conversely, a financier that expects a property’s price to drop are bearish will be long on a put option and preserve the right to market the property at a certain price.

  • A long position is the opposite of a brief position (short).
  • A long long position describes the purchase of a property with the assumption it will increase in value a bullish mindset.
  • A long position in options agreements suggests the owner possesses the underlying property.
    A long position is the opposite of a brief position.
  • In options, being long can refer either to outright possession of a property or being the owner of a choice on the property.
  • Being long on a supply or bond investment is a measurement of time.

Long Holding Investment.

Going long on a supply or bond is the extra traditional investing technique in the capital markets. With a long-position investment, the investor acquisitions a property and possesses it with the assumption that the price is going to climb. This investor typically has no strategy to market the safety in the near future. Of holding equities, long describes a measurement of time.

Going long on a supply or bond is the extra traditional investing technique in the capital markets, particularly for retail investors. An expectation that possessions will appreciate in value over time the buy and hold method saves the investor the demand for continuous market-watching or market-timing, and enables time to weather the unpreventable ups and downs. Plus, background gets on one’s side, as the stock market certainly appreciates, over time.

Obviously, that doesn’t indicate there can’t be sharp, portfolio-decimating decreases in the process, which can be fatal if one occurs right prior to, claim, a financier was intending to retire or required to liquidate holdings for some reason. A long term bearish market can additionally be troublesome, as it frequently favors short-sellers and those banking on declines.

Lastly, going long in the outright-ownership feeling indicates a great quantity of capital is tied up, which could result in missing out on various other opportunities.

Long Placement Choices Agreements.

On the planet of options agreements, the term long has nothing to do with the dimension of time however rather talks with the owning of an underlying property. The long position owner is one that currently holds the underlying property in their profile.

When a trader acquires or holds a telephone call options contract from a choices writer they are long, due to the power they hold in having the ability to acquire the property. A capitalist that is long a telephone call option is one that acquires a telephone call with the assumption that the underlying safety will increase in value. The long position phone call owner thinks the property’s value is climbing and may choose to exercise their option to buy it by the expiration date.

But not every trader that holds a lengthy position thinks the property’s value will increase. The trader that possesses the underlying property in their profile and thinks the value will drop can acquire a put option contract.

They still have a lengthy position because they have the capacity to market the underlying property they hold in their profile. The owner of a lengthy position put thinks the price of a property will drop. They hold the option with the hope that they will have the ability to market the underlying property at a beneficial price by the expiry.

So, as you see, the long position on a choices contract can reveal either a bullish or bearish sentiment relying on whether the long contract is a put or a telephone call.

In contrast, the short position on a choices contract does not own the stock or various other underlying property however borrows it with the assumption of marketing it and after that buying it at a reduced price.

Long Futures Contracts.

Financiers and organisations can additionally become part of a lengthy forward or futures contract to hedge versus adverse price motions.

A company can use a lengthy bush to lock in a purchase price for an asset that is required in the future.

Futures differ from options in that the owner is obligated to acquire or market the underlying property. They do not get to pick however have to complete these actions.

Intend a jewelry maker thinks the price of gold is poised to turn upwards in the short term. The firm can become part of a lengthy futures contract with its gold supplier to purchase gold in three months from the supplier at $1.3K. In three months, whether the price is above or listed below $1,300, the business that has a lengthy position on gold futures is obligated to purchase the gold from the supplier at the agreed contract price of $1,300. The supplier, in turn, is obligated to deliver the physical commodity when the contract expires.

Speculators additionally go long on futures when they think the prices will increase. They don’t necessarily want the physical commodity, as they are only thinking about profiting from the price activity. Prior to expiry, a speculator holding a lengthy futures contract can market the contract out there.

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