In the market of currencies,options, stocks and futures there's a single tool which is the most adaptable and that is stock options. The range of missions of both call or put options are immense. It is a point in fact however that this has also a negative side effect. Whenever you are working with financial derivatives and ever-changing factors there's the chance that funds are going to be lost rather than gained. Although a lot of investors and traders are lured by the high yield rates which are possible with options people often neglect to have a rather close look at the overall performance of calls and puts. Those who have been in the stock trading business for a while would let you know upfront that up to eighty percent of all stock options turn out to be worth nothing whenever they expire. Mostly, these are the stock option buyers who suffer a loss of the invested money. But the flip side of the coin is options sellers generally are making revenue. The covered call strategy is one way of combining a stock buy with the selling of a call option. Selling put options is another tactic that you can utilize. When going for put option selling strategy as an option trader you need to make sure you totally understand what's happening. First of all its essential to know that puts are generally there to protect the losses of a stock should the price of a stock plunge. If this should occur even though the stock will lose value the put will actually gain in value. Your stock is then secured or hedged, as it is called. Essentially it is an insurance against losing stock and you will pay a premium of around 10% of the amount you are investing. If you change the sides and begin to offer puts you must understand what probable cases could occur. First, the put seller is getting the premium for the put option. There are a number of factors that come into play that will determine how much that is and they include things such as the underlying of the put and the volatility of that underlying and the duration of the put. You definitely don't wish to take too lightly the risks involved in selling puts. In order to keep the risk low you need to begin to sell "out of the money" puts. There the premium is lower but the potential risk of the put to get "in the money" is lower also. Moreover, one must do his research and assess which stocks are constant and likely to rise in future so that he can easily market puts on these stocks with a higher possibility of pocketing the premium. You certainly don't wish to underrate the potential risks involved in selling puts. Out of the money puts are a great method to begin and lower your risks as these are known option trading strategies used by the pros. There the premium is lower but the potential risk of the put to get "in the money" is lower also. Smart analyzing and investigation is called for in order to completely understand which stocks and options will likely rise and tend to be stable which is also a general strategy in the case of doing stock investing. These are the ones you wish to sell puts for and will have a higher chance of earning premiums.
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