Learn More About Stock Options Trading

Stock options trading is complex, and investors need to put in the time to learn how it works before making puts and calls. While special strategies apply to bull markets and bear markets, exchanges tend to trend up or down only about a third of the time, so the best place for novices to begin is with stock options trading strategies that apply to non-directional or neutral markets.

Broadly speaking, expert investors identify six basic approaches to stock options trading in neutral markets. The most basic of these are the guts and butterfly techniques. Using a guts approach, investors aim to sell their holdings in the "call" and/or "money put," whereas the butterfly technique aims to buy either "out of the money call" or "at the money," and then sell "in the money put." Alternatively, buying and selling can be flipped, in which case the investor would buy in the money put and sell either out of the money call or at the money.

More advanced techniques include the condor, straddle and strangle. For foreign markets, the risk reversal stock option strategy is often used, in which investors request volatility quotes from brokers instead of price quotes. Positive risk reversal occurs when the volatility of the calls that have been placed on an asset exceeds the volatility of the puts that investors have placed on it.

An East Coast Investing Company With Advanced Stock Options Trading Experience

Trade Wall Street Financial is an East Coast brokerage that offers advanced client tools and complete access to experienced professionals with advanced knowledge of futures investing. Clients in the U.S. and around the world can open an account online or by mail.