TradeX App Earning Money

                                                                                                         TradeX App Earning Money

How To Make Side Income By Trade In Options?

There are various ways for a trader to earn through trading in stocks. One of them is options trading. Here in this blog, we will discuss options trading and some of the strategies to trade in options.

What Are Options

Options are the agreements that grant the buyers a right to buy or sell a security at a price fixed by them. It is not an obligation and the trader can decide what he wants to do before the contract expires.

The options help an investor hedge their risk and often are used against a weakening stock market. It is also used to produce recurring revenues. There are two types of options:

• Call Option – It is the contract that gives the buyer the right to buy and the seller an obligation to sell.
• Put Option – It is the contract that gives the buyer a right to sell and the seller an obligation to buy.

What Is Meant By Options Trading

Options trading means that the trader can purchase or sell a security at a price that is predetermined by the trader and within the specified time. Trading in options is a bit more complicated than stock trading but if the traders have full knowledge of options trading it can help them yield larger profits.

While making a trade in option the trader does not have to pay the full amount of security. Similarly, it can also protect from losses if the price of the security goes down.

Types Of Options Trading

Call Options Trading

Call options are used to initiate a bullish position in the index. To buy a call option, a buyer pays a premium. As the price of the stock goes up the option premium increases and the trader books a profit.

Put Options Trading

The put options are used to initiate a bearish position in the stock. The premium paid for buying a put option increases as the price of the stock falls. The buyer of the put option benefits from this falling price.

Advantages Of Trade In Options

Options trading is very helpful to traders who have low initial exposure. The cost of acquiring an option is less than the cost of acquiring a stock. Another advantage of trading in options is that it is quite flexible and the traders can make many different moves before the contract expires. A trader can also benefit if he uses a strategy that limits the downside risk which may help them generate recurring income.

Disadvantages Of Trade In Options

There are various disadvantages also to trading in options.

• This concept can be complicated for beginners and even some experienced investors.
• If the trader holds options for a longer time the time value decreases.
• Options are not available for all stocks, restricting the possibilities available to the trader.
• There is very less analytical information available on options contracts which makes it difficult for the trader to decide which contract to buy.

Strategies Of Options Trading

Various strategies in options trading help traders increase their income. Some of these strategies are:

Iron Condors

The Iron Condor Strategy is the most popular strategy among traders. It involves four options contracts with different strike prices but with the same expiry dates. In this strategy, the trader sells an out-of-the-money call and put and then buys the calls and puts more away from the current market price.

As the price difference between the bought calls and puts and the sold calls and puts is huge the trade receives a net premium for placing the trade. Trading using the iron condor strategy involves combining a bull put spread and a bear call spread.