The magic behind options trading is that it permits for a number of options trading strategies to be used in conjunction with varied stock dealing philosophies. Even though, varied strategies are available, each of them has different levels of risk tolerance and profitability. Using a number of such strategies will increase the chances of succeeding in this market. Some of the strategies are discussed in the following paragraphs:
Position trading: Generally, when it comes to stock market, dealers have the habit of purchasing stocks of companies with good fundamentals and hold them for several months or even years together. They wait until the stocks get real good value as compared to what they paid for purchasing them. Once they find that the value is increasing, they will wait for other holders to make their move so that its value will further increase. This method will be helpful in earning more as compared what was actually paid for the purchase.
Momentum or trend trading: Once a stock has made a clear move, the role of momentum dealers will begin and these people generally look for short-term profits and they do not want to hold the stock for more than six months and they wait only for six weeks at the minimum level. The same technique can also be followed in trading options for getting profits from the options.
Swing trading: Under this method, the stocks are not held for more than 10 days by the dealer. Their minimum waiting time is two days. Under this method, the current trend of the stocks is analyzed by the dealers for earning profit.
Day trading: As the name suggests, purchase and sale of shares and stocks take place within a day. But, beginners are generally knocked out of this method as it is the requirement that the dealers should have at least $25000 for this method.
Before trading options, the first time dealer and even some of them, who has met several losses can just take up some coaching classes offered by professional companies. This type of coaching will be of great help to them to protect themselves from losses. Once the losses are avoided, they can slowly learn different options trading strategies one after the other by themselves once they get out of the fear of losses. Even some of these coaching providers are providing the opportunity for the dealers to understand how they are succeeding in the market.