Why is Selling Options better than buying
Buying Options Vs. Selling Options. What is better buying or selling options? Would you rather pay in order to have a chance to make a profit or receive option premium at front.
Trades that Sell Option Premium has the several ways to make consistent profit with options. You don’t have to know in which direction a stock is moving in order to make a profit.
Stock options today are one of the most successful financial products. Options have proven to be superior and prudent investment tools.
It offers the investor, flexibility, diversification, control in protecting of your portfolio. It helps you generating a huge and steady flow of income. So,you would ask yourself should I buying or selling options?
Buying or Selling Options
If you have bought options however, you can only win in one scenario. That is if the stock price moves in your favour fast enough. It needs to move above your breakeven, that is the strike price + the premium you have paid.
We prefer to sell premium to give ourselves the best opportunity for success. Premium Sellers can win in three scenarios: if the stock price does not move much, it moves against us slightly or it moves in our favour.
The premium of an option varies with market sentiment. The premium is based on a number of factors. The most important is implied volatility. IV is an estimate of how much a security will move over a specific period.
When you use Implied Volatility for you trading decisions it opens up another dimension. It may help you to profit much more. In high IV environments we look to sell option premium in anticipation of a contraction in IV.
Influence of volatility on Option Premium
Implied volatility plays a very important in the price of the option premium. Implied volatility or IV is quoted as a percentage. It reflects how much an underlying could move from the current price over the next 12-month period.
Days to expiration plays a significant role in generating a value of a premium for an option. Longer times to expiration of options create higher premium. The premium of an option erodes as the expiration date approaches. It eventually is worth nothing when the option expires. And with our strategies we will take advantage of this by selling options.
I trust that the posts on this website will be of great help for you in learning to trade options. Selecting the right strategies and using advanced trading techniques. So that you will make a good return of investment when you Sell Options and receive Option Premium at order entry.
How would you like to apply profitable strategies and sell option premium week after week or month after month? Read more about how to sell option premium