Investment opportunities come in two distinct flavors, yet they can be joined into incalculable various procedures. Choice pay procedures are intended to exploit time rot to create a predictable pay. Financial backers might choose to utilize call choices, put choices, or a mix of choices to accomplish these objectives.
In this article, we will take a look at 4 options trading strategies to generate income from.
Iron condors are perhaps one of the most popular options trading strategies for generating income. Iron condor is an options trading strategy that is made up of two puts and two calls all on the same expiration date.
The iron condor earns the most money when the price of the stock expires between the middle strike prices. The trader will get to keep all their premium and it’s a great way to generate monthly income.
A credit spread is an options contract that includes buying and selling a put or call option with different strike prices on the same expiration date. They are used as a way to collect premium on one side of the market and are an effective way to generate income from stock options.
The great part about credits spreads is that they offer a fixed level of risk and defined profit targets. They are used frequently by traders who believe that the price of a stock is going to trend in a single direction.
A naked call options contract is a strategy in which you sell out of the money call options in order to collect a premium. It’s worth noting that this strategy is very high risk since there is no underlying stock position.
Although you get to keep a higher premium with this strategy and collect more income, you have virtually an unlimited amount of risk if the price of the stock spikes to the upside.
With a naked put you will collect the most premium since investors and traders pay more for downside protection. It’s worth noting that trading naked money puts carry a significant level of risk. You need to ensure that you have enough cash to buy the underlying stock at your strike price if the price of the stock goes below your strike price.
It’s a great strategy to use if you want to get assigned shares of stock at a lower price while collecting premium in the meantime.
Before deciding to trade any of these strategies it’s important that you are fully aware of all the underlying risks so you can make good informed decisions about your investments.