An option is a synthetic instrument of the financial market, and unlike ordinary securities, the price of which changes, the value of an option is strictly tied to a point in time, so take this factor into account when planning to buy or sell an option.
Instructions
Step 1
The main rule of buying options is trend orientation. Stock or futures prices will either decline, rise, or remain unchanged. If you buy a call option and prices rise, you will make a profit; if prices fall, you will lose everything. When you buy a put option, the opposite is true, you will make a profit if prices go down.
Step 2
When buying options (bets on price increases), keep in mind that it is much more difficult to close deals with a plus in this market than when conducting transactions in the stock market. After all, if you have decided on the shares and the price at which you will sell them, then with options it is necessary to take into account the time factor. When the price of the option has risen to the level that you expected, at a time greater than the planned one, the option will expire and the money will be lost. Buying a put option only makes sense if you are looking for more than just a smooth downtrend, but a collapse. Remember that prices fall twice as fast as they rise, this rule will help you when buying short-term options.
Step 3
Choose cheap short term put options to buy. Their price practically does not reflect the hopes of market players. The best time to buy this instrument is when you expect a sharp change in trend. Remember that if you make a mistake, you will lose everything, so carefully weigh the pros and cons before buying. If you expect a gradual decline in the rate, it is better to choose operations with stocks. The main thing is to catch a sharply changed trend.
Step 4
When it comes to selling an option, study the trend carefully. If the trend is downtrend, sell call options, in case of an uptrend, offer put options for sale. Do not sell when prices are frozen and players are waiting. Remember that it is dangerous to sell “close to the money” options that promise maximum returns. If they are sold, even a slight change in the trend will lead to a loss. Analyze the situation and calculate how much the prices may change before the option expires, sell the option at a price outside the corridor, which, in your opinion, will develop in the market.
