Listed options trading is a type of securities trading that allows investors to buy or sell options contracts on an exchange. You can use them to wager on a stock, index, an asset’s future direction or hedge against downside risk. View the Saxo website to start trading options today.
Options grant the holder the authority to buy or sell an asset at a set price by a specific date. The two types of options are: call and put options.
Call options give the holder the entitlement to buy an underlying asset at a specified price on or before a specific date. Put options give the holder the entitlement to sell an underlying asset at a specified price on or before a specific date.
Get to know the options chains
The options chain is a list of all the available option contracts for a given underlying asset, and it shows the prices of each option. The options chain is an essential tool for trading listed options, as you can use it to find profitable trades and manage risk.
Use technical analysis
You can use technical analysis to predict future price movements by analysing past price data. Technical analysis can be used to find trading opportunities and manage risk.
Manage your risk with stop-loss orders
A stop-loss order is set out with a broker to sell an asset when it reaches a specific price. Stop-loss orders are used to limit downside risk in a trade.
Use limit orders to get the best price
A limit order is an order that is placed with a broker to buy or sell an asset at a specified price. Limit orders are used to get the best possible price for an asset.
Use options to hedge your portfolio
You can use options to hedge against downside risk in a portfolio. You can sell a put option to hedge against a decline in the underlying asset price.
Use options to generate income
You can use options to generate income through the sale of call options. You can sell a call option to generate income if the underlying asset’s price doesn’t rise.
Use options to diversify your portfolio
You can use options to diversify a portfolio. By buying call options and put options, you can gain exposure to different underlying assets without owning the underlying asset.
Use options to trade volatility
You can use options to trade volatility. Volatility measures the fluctuation in the price of an asset, and you can use it to find trading opportunities.
Monitor your trades
It is crucial to monitor your trades and manage your risk. It would be best to keep a close eye on the underlying asset’s price and the option contract to plan how you will exit the trade if things go against you.
Use a trading journal
You can record your trades in a trading journal. It is vital to keep a trading journal to track your progress and learn from your mistakes.
Have a trading plan
A trading plan is a series of rules that you follow when making trades. A good trading plan should include entry and exit criteria, position size, risk management, etc. Having a trading plan will help you be consistent and disciplined in your trading.
Patience is a virtue in trading. You should not enter a trade if you are not confident that it will be profitable. You should wait for the right opportunity and be patient when waiting for a trade to develop.
Overtrading is a common mistake made by traders that you should avoid. Overtrading is when you enter too many trades or hold on to trades for too long. When you overtrade, you increase your risk and make it more challenging to make money.
Have realistic expectations
Trading is a long-term game. You should not expect to make a lot of money overnight. You should be patient and have realistic expectations. It would be best to invest the appropriate time and effort to succeed in trading.