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Instead of buying the shares you decide to buy call options on Google (GOOG). Fundamentally, the call writer will profit when the stock price remains at or below the strike price as the call will expire worthless while the investor keeps the premium. This provides you with the option premium while your maximum risk is strike price of the option minus the premium received. Say you are interested in Apple (AAPL) and think it will appreciate in value or remain the same. The straddle strategy is an option strategy that's based on buying both a call and put of a stock. As long as the price of Apple (AAPL) is less than (120 + 5 = $125) at expiration, you have made a profit. The options used will be identical except for the strike price (use same expiration, same stock). If the price of the stock hovers around the initial price, both the Call and the Put will not be that much In-The-Money. One is to take small losses when they happen, and let your winners run. And remember - it's always good to start with pretend trades to get the hang on things, before you commit your life savings to the market. While you are waiting for the option to expire you can invest that $600 elsewhere say in Google. If you can identify a system that delivers a consistent profit, and have the discipline to stick with it even when an individual trade loses, then your chances of success are high. If a stocks price rises above the strike price of the call option the investor will exercise the right to buy the stock. Long Call: Simply buy a call option on a stock. Now you just need to choose the expiration month (do you think the stock will increase in value soon or will it take a while?) Say you believe Google (GOOG) will increase in value within 1 month. As long as the stock moves in one direction more than the amount that you paid in option premium you will profit. This strategy is implemented by simply selling call options on a stock. As long as the Apple Shares remain above (110 3 2 = $105) and below (130 + 3 + 2 = $135) you have made a profit. When an investor contemplates any option strategy, he or she should always be mindful of the risks, since trading options is a bit more risky than simple stocks. Having said that, there are a number of very successful trading systems that work well over the long term. As an example, say your stock is trading at $29.00 and you feelthat your stock may trade down a little but still remain in anuptrend cycle. 4) Long Combination (Long Strangle): This strategy is similar to the Long Straddle as it involves buying a put option and a call option on the same stock; however, you use different strike prices. If you would like to learn more about Option Trading Strategies please visit - Conservative Options or just type in There are two types of option contracts - Call options and Put options. Put Writing (Short Put): Simply sell put options on a stock. The premium for the Call (which is $2 Out-Of-The-Money) is $0.75, and the premium for the Put (which is $2 In-The-Money) is $3.00. On the other hand, if the price of the stock decreases, then the value of the put increases by one dollar for each dollar drop in the stock price below the strike price. Short Straddle: This strategy is implemented by simultaneously writing a put and a call option on the same stock with the same strike price and the same expiration date. You buy calls on Starbucks (SBUX) with a strike of $25 and 1 month to expiration for $1. If you have a more neutral view on your stock you would sell anat-the-money-call in order to receive a bigger premium whichallows for greater downside protection if the stock trades downand higher potential profit if the stock becomes stagnant. For more options strategy and Charts visually representing when each strategy should be used and what the potential risks and rewards are please visit my blog. We decide to buy a $65 Call and a $65 Put on XYZ, $65 being the closest strike price to the current stock price of $63. If you buy puts and are conservative you could write at the money $500 puts for one month out for say $15.
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