Developing a winning options trading strategy in Asia

options trading strategy

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When it comes to options trading, Asian markets can be risky. The primary reasons for this are that foreign traders do not have the same depth of knowledge about Asian markets that they may have gained in their home countries’ marketplaces, and Asian options contracts are often less regulated than here in the U.S. For these reasons, traders should familiarize themselves with the risks before investing their money in Asian options.

Options trading can be a profitable way to invest and a very dynamic form of speculation. Since it is more speculative than buying stocks or futures, there are fewer rules or guidelines that you could follow which will guarantee consistent returns from your investments, however much patience and determination you put into learning about the options market.

What type of trader are you?

It would help if you started with a concrete financial goal for trading options. If you have not identified yourself with a particular type of trader, here are some examples:

Aggressive Trader

You love going for significant gains but hate losing money. You would buy call or put options when they’re close to being at the money, anticipating a quick rise or fall in the stock price. Conservative Trader – You love taking as few risks as possible and making as much money as possible at a time.

You would buy call options when they’re deep-in-the-money or put options when they’re far out of the money expecting practically no movement in the stock because it is overpriced or underpriced, to begin with, respectively.

Advanced Trader

This type of trader will use strategies that involve buying and selling different types of option spreads simultaneously to profit from any movement in a particular direction for a limited risk or slight loss if their assumptions are wrong about which way the market would go.

No matter what type you choose to be, your next step should be researching how various strategies can help you achieve your goals.

Options trading strategies

There are many options strategies available to use; however, here are some basic strategies that may be easier for beginners:

Covered Call

You own 100 shares of XYZ and want to make a profit in the next month without letting go of your stock if it does not rise by more than 5% in price. You would call someone and offer them the right but not the obligation to buy your 100 shares at $100 each within a specific time frame,

Cash Secured Put

You own 200 shares of ABC, which is trading at $10 per share when you put in an order with your broker to sell 200 puts on ABC with a strike price of $9for a premium of $0.50 per share. You commit yourself to selling your 200 shares for $9 each if the put is assigned.

Bull Call Spread

You buy ten call options on XYZ with a strike price of $15 expiring three months from now for a premium of $2, and at the same time, you write or sell ten call options on XYZ with a strike price of $25 also expiring within three months but for a premium of only $1.

With this strategy, you can limit your maximum loss to just the initial credit received ($200), but have no downside beyond that point since any gains will be capped at the break-even point, which in this case would be if XYZ stock price goes above $25 by the time the options expire.

Summary

There are many options trading tutorials online; however, it would help you out to at least identify your preferred style of the trader before looking for anyone should take the time to understand the factors that influence option prices and how they can be applied in real-time. This will provide you with a solid foundation for options trading and prevent any mistakes that could quickly wipe out what little capital you have started with. Also, use a reputable online broker from Saxo Bank; for more information, click to read more.