Options trading can be an effective way to earn a greater return on your investment in a relatively short period of time. This is because you don’t need to buy or hold the underlying stock to make a profit. Instead, you pay a premium to acquire the option that can be bought or sold at any point before it expires.
An Overview of Options Trading
At its core, an option is the right to buy or sell 100 shares of a company’s stock at a predetermined price. If you buy a call, you believe that those shares will be worth more than the strike price at the expiration date. If you sell a put, you think that the shares will be worth less than the strike price upon expiry. An options trading advisory service can provide more insight into what they are and if they are worth pursuing.
You Might Be Able to Write Your Own Options
If your brokerage account has been approved for options trading, it may be possible to write your own covered calls. A covered call enables you to sell the right to purchase shares that are currently in your portfolio. Ideally, the price of the stock will remain stagnant, which would allow you to collect the option premium without having to liquidate a portion of your portfolio. Options trading advisory service providers might be able to teach you more about covered calls and other strategies that might help you increase the return on your current holdings.