What are the best option strategy capable of earning high returns ?
Traders often enters in to option contract with a motive to limit their risk. There are several different option strategies which can be used . Traders must have a good understanding of different strategies and in which market they are best suited to make maximum benefit by using appropriate strategy . By combining one or more option position a strategy is implemented. Financial Advisory Services like option trading tips also helps in earning good returns. Option contracts are capable of generating high returns with minimum risk which traditional buying and selling of stocks can not.
Option strategies which are most preferred and helpful in earning high returns are discussed below :
1)Covered Call Writing
Under this strategy a trader has to sell a call option in which he is giving the rights to purchase a stock that he owns at a pre decided price. The buyer of this option will have to pay a premium amount for it. This strategy is effective in almost all different market like bearish , bullish, range bound. In slightly bull market best results can be gained using this strategy. When the share prices rises above the strike price and contract in exercised premium amount will be you profit .
A protective collar strategy is designed by holding shares of underlying security and simultaneously buying protective puts and selling call options against holding . Both put and call option are equal in number of contracts and have same expiration date as well. This strategy facilitates traders to protect themselves from sudden price fall of the underlying security.When the price of underlying security rises above the strike price of the written call option because benefit of using protective collar strategy can be gained.
3)Bull call spread
This strategy is not complex and traders prefer using it. Here a trader has to simultaneously buy call option at low strike price and sell same amount of call option at a price which is higher then the strike price. When the price of the underlying security rises above the strike price of call option sold this strategy offers traders with maximum benefit.
This strategy is a bit complex and difficult for beginners to understand.However this option trading strategy is very popular and used for earning consistent profit when price of underlying security is not having major changes. Iron condor is the combination of bull put spread and bear call spread.Using this strategy traders can generate good returns even when price of underlying security does not show much movements.
These are few most popular option trading strategies among traders which are helpful in earning high returns by facing minimum risk in the market. For improving performance in future market , stock futures tips as depicted by market analysts after performing quality research work can be used. Which ever trading strategy a trader is following , having a complete knowledge about it is must .As having vague knowledge is never sufficient to succeed in the market.