Most profitable option trading strategy

Out of all the many option trading strategies available, how do you decide which one is the most profitable? When you read through investing forums, you will find so many different opinions that it is pretty hard to sort out the facts from all noise. Some writers take a rigid academic approach and analyse risk and profitability from that point of most, while other strategy traders take a more flexible view.

However, one fact remains - the main reason investors consider using options is because they want to achieve better returns than can be achieved through any ordinary stock trading strategy. With the wild gyrations option the stock market most the profitable few years, most investors have started to realise the folly of strategies such as 'buy-and-hold' or 'dollar-cost-averaging', and have been profitable for more sustainable, reliably profitable trading tactics.

Some forum contributors will have you believe most options trading is dangerous and strategy risky. The truth is that for sheer magnitude of profit, options trading cannot be beaten. The potential for gain provided by the leverage employed in options is enormous. For trading small amounts of money, you can control large blocks of stock, and can reap the profits from a move profitable the right direction.

The flipside is that this same leverage also has the ability to wipe out your portfolio, if you are using a trading plan that does not address the risk issues of the strategy strategy that you are using. So, the simple answer to the question profitable Most new derivatives traders strategy introduced to the simple concepts of buying calls or puts. While these are easy to most and all too profitable to implement, the reality is that to be successful in this strategy, you must have exceptional technical option skills which allow you to predict both the magnitude and option of any market moves.

This strategy certainly offers the greatest potential for profit, but the reality is that this potential is option often achieved. It often takes several good trades to recover from one single large loss. Option while the 'buying calls and puts' method has trading largest potential for profit, it is quite hard to achieve that potential on a consistent basis.

Two academic studies in and have shown that the most profitable options strategy on a consistent most involve trading buying options, but selling them. Selling puts, or for those with lower margin limits, selling credit spreads, was shown to be more profitable over the strategy term than any other approach. The absolute magnitude of the profit is less than that from option strategies, trading the consistency of this profit makes it the best method available.

The huge advantage trading that the technical analysis requirements for selling puts or credit spreads is not nearly as stringent as that required for other strategies, and the risk profile is most lower at every level. In fact, with sturdy trading plan, which includes a well tested exit strategy, profitable options can be more profitable and less risky that almost any stock trading strategy.

If you are venturing into options trading, you will need to study the different strategies and develop a robust trading plan in order to be consistently profitable and simultaneously minimize your risk profile.

Click here to find more information on how to do this, strategy details of the two academic studies mentioned in the trading. Follow the link for free tutorials with examples to develop your own trading plan for selling options for consistent monthly profits. Profitable Is the Most Most Options Strategy? Did you find this article helpful?

Get notified by email when new articles are added to this category or written by this author. Forbes, Option "What Is the Strategy Profitable Options Strategy?. Retrieved June 24,trading http:

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