Selling Puts And Calls For Profit

Posted by The Popular News Today on Saturday, February 11, 2012

By Robert Williams


Put and Call selling is an options trading strategy that is included in many long position strategies. When you use this strategy, you can generate revenue even when you are not actively trading. This can be a very successful strategy, but will require that you have a comprehensive understanding of how Puts, Calls, and selling work to reduce loss risks.

When you decide to sell a Call or Put option, you will begin with a contract. The contract will contain the Exercise Price, or Strike Price, and the length of time that the option will be active. The exercise price is the amount that the underlying asset can be sold or bought for by the purchaser.

The difference between the market price and fixed Exercise Price at the time the option is acted upon is the premium that you will sell the option for. The higher that this difference is, the greater profit you can make on the option. Learning how to read and analyze trend reports will help you to calculate when the best time to sell an option to someone else will be.

Taking advantage of the great training modules and programs online will help you to learn how to analyze stocks and effectively use trend reports. You can also learn more about the strategies that successful traders use and which will help you to meet your goals.

There are a few simple rules of thumb that will help you be more successful when you are using this strategy. First, stay within your comfort zone and don't sell more Puts or Calls that you are willing to buy back. While a contract is active, keep a close eye on the market and exercise your right to buy back an option if you anticipate a change that could result in a loss. Keeping track of your total outlay will also be important.

Training is a key to making effective, strategic decisions. Talking to people who use options trading strategies successfully will be very beneficial. They will be able to share techniques and methods that will help you to successfully reduce the level of risk associated with this type of strategy. Most of the individuals who use this strategy are trading on long positions that are neutral. This allows them to consistently generate revenue even when the stock is not moving.




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