Great Tips to Trade Stock Options for Beginners
There are plenty of terms being thrown around the stock market. You may have heard of the terms “Put Options” and “Call Options”. What are these options and why are they being used in the shares market?
Well, simply put, an option is where you place a certain price on a stock which will probably go beyond or below the original asking price. When done right, you can gain more profits than solely relying on dividend payments.
Now, how about the put and call options? What is the difference between the two? Well, a Put option is where the owner of a particular share gives the potential buyer the right to sell his stocks at a specified price and a specific time.
Conversely, a Call option is the complete opposite where the potential buyer purchases those stocks instead of selling them.
That being said, options are great if you want to hedge your stocks against possible market downturns. Another advantage would be that you earn a lot more money than buying specific stocks directly from a company.
If you’re interested in trading stock options or best share trading company in Malaysia, then read the rest of the article to find out the best possible strategies.
1.Familiarize Yourself with the RSI
The RSI is also known as the Relative Strength Index. This is an indicator which helps you see the momentum of stocks in the market. It can detect stock options that are overbought or oversold easily thanks to the stocks’ expiration date factor.
Really, when trading stock options, the expiration date is quite important because it will tell the potential buyer when he could buy or sell stocks at the best prices possible (remember the Put and Call options? The specified date is called the Expiration Date).
2.Look at the Market 15 Minutes After Opening
The first few minutes after the opening bell has rung is the most important thing you need to keep in mind. At this small timeframe, people make trades; buy or sell stock options and what have you. This is important to look at so that you can see the initial market bias and so that you can conduct trades whenever it is possible to gain maximum profits.
3.Trade Only if the Market is Bullish
The stock market is said to be bullish if the stock market prices are going to increase during the day. That is why the first 15 minutes is crucial because it is usually the time where a trader will know if the market is going to be bullish or bearish.
4.Buy Call Options by Choosing the Nearest Expiration Date
The way you utilize call options is to buy them by choosing the nearest expiration date. You want to focus on the weekly cycle instead of the usual day trading to maximize your gains.
5.Sell Your Call Options within the 15-minute Window
Looking at the RSI, you can tell if the other options sellers are going to get in the market. That is what you do not want to happen if you’re going to sell your options.
Make sure that you look at the indicator, see if the market is bullish, and proceed immediately with the sale of your call options and you’re good to go. This way, you can increase your chances of earning more profits than ones who do not capitalize this limited time frame every trading day.