Use options to trade one-off events such as corporate restructurings and spin-offs, and recurring events like earnings releases.
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If you are excited or overwhelmed by the number of stock trading strategies available to learn, then you'll feel the same way about options trading.
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Overall, the most profitable options strategy is that of selling puts. It is a little limited, in that it works best in an upward market, although even selling ITM puts for very long term contracts (6 months out or more) can make excellent returns because of the effect of time decay, whichever way the market turns.
An option buyer can make a substantial return on investment if the option trade works out. This is because a stock price can move significantly beyond the strike price. An option writer makes a comparatively smaller return if the option trade is profitable. Most at home stock and options traders think that professional traders have some magical advantage, or secret, that makes them more successful. As an options coach to a lot of students each month, I constantly hear this "sob story" from some of .
This year alone, I’ve managed to average 15% per trade over 21 trades. My win ratio: %. A $10, account that invested only 10% per trade, or $1,, would have gains of roughly $3, for a % return. Readers always ask me to bring them the most profitable strategies. Well, here it is. I trade a few advanced option strategies here and there, but I make most of my money just sticking with the basics. There are four basic option positions: long Call options (buying Call options), short Call options (selling Call options), long Put options (buying Put options), and short Put options (selling Put options).
But the greatest options trade I ever saw happened during the market crash of Legend has it that one trader thought he had bought one put on the S&P (the right to short the S&P ), only to find out many hours later he had bought 1, Wendy Kirkland.