What do you use stockoptions for

.Why StockoptionsThere are a number of reasons an investor would use options. As you may already know, calls can be used if you have a bullish assumption and puts when you are bearish on an underlying stock.

With one option you can control 100 shares. An option costs a fraction of buying 100 stocks outright. However, there are several compelling reasons to add stock options to your portfolio.  Most traders are pursuing one of these three goals:

Stock options for Hedging

In times of uncertainty and volatility in the market, some investors turn to hedging using puts and calls versus stock to reduce risk. Hedging is even promoted as a strategy by hedge funds, mutual funds, brokerage firms and some investment advisors. Options are a crucial tool in guarding a stock portfolio against the volatile ups and downs in the market. A trader that has many stocks can protect his portfolio with buying puts.  Inverting this paradigm, short sellers can buy call options to limit their upside risk.

Options used for speculation

Stock options can be used to speculate on the future price direction of the underlying shares. Do you expect the price of a stock goes up you buy a call or sell a put. If you think the price of a stock goes down you buy a put of sell a call above the market price.

What’s more, calls and puts can be combined in various configurations — Spreads, Iron Condors, straddles and strangles.

Whether the stock is expected to move up, down, or sideways, there’s a viable option strategy that can be used to profit from that particular scenario.

Stock Options for Generating income

During periods of slow markets, options offer a number of ways to boost your bottom line with premium collecting strategies. The best time to play this strategy is when Implied Volaility is high. Stockoptions will be more expensive. And since IV does normally not stay long high it will revert to the mean. The option price drops and you can cloes the deal with a profit.

Sell puts below the stock price if you expect the price to go up. Another possibility is to  sell calls above the stock price if you expect the market to go down. If you do not expect the price of the underlying move much you can sell a straddle or a strangle.

If you want define you risk you can  trade the covered call strategy, wherein an investor sells (or writes) call options against a stock in his portfolio. The sale of the call results in an immediate credit, allowing the trader to profit from an otherwise lifeless equity.

Or if you want to be more capital efficient you sell Call Spreads or Put Spreads or Iron Condors.

The ultimate goal is to manage traedes early. So that you can take risk of the table and keep a part of the option premium. The more winners you have the more your portfolio grows.

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