High probability options trading is an elusive concept, especially if you are new to the stock market.
Perhaps the most significant setback for a trader is when they speculate that a stock is moving toward a profitable price but ends up doing the exact opposite.
What if we told you that it is more profitable to foreclose the price of a stock rather than predicting the future earnings of the stock?
That is the high probability Options trading Concept for you. Fortunately, you’ve landed on the right page where we’re doing this.
So, if you want to dive into options trading to succeed, here is our list of the best strategies for high probability options trading.
Let’s look at high probability options trading in a simple way.
For example, it is your wedding and you are wondering what gifts you will get.
It is impossible to find out who is going to give you what unless someone tells you beforehand.
In this case, it is much easier to think about what you are unlikely to get.
Suppose no one is going to offer you a fully funded exotic honeymoon trip or a Mercedes Benz.
In the same way, you can never predict how stocks will behave in the future.
However, you can strategize your trades based on the price points a stock is unlikely to hit.
This is possible with a high probability of trading options.
Advanced options trading strategies let you hold your stocks at a certain strike price primarily until they expire.
While holding the stock, you can easily sell or buy an asset at a price higher than its market value or a lower price depending on your strategy.
Remember that the price range can expire in a few hours to several years in a row.
So if you predict the price will go up, this is what you should go for Call option.
On the contrary, if you foresee the price drop, you should go for put options.
Mainly, there are two main ways you can trade options with a high probability: by selling or buying stocks.
In advanced options trading strategies, these phenomena are referred to as long and short. However, if you want to have a successful options trade, you have to pay a premium.
This premium is set in advance by the market based on its premium volatility.
If you don’t have a lot of money to work with, a commission-free trading platform is a great way to start small Webull or Robin Hood.
This can be a decent way to put real money (but small dollars) into work.
This way you can get a feel for how options are traded.
Here is a list of the leading high probability options trading strategies, with explanations for each, so you can make an informed decision.
With options to trade options with high probability, you can take advantage of the flexibility in a particular market.
The biggest mistake an options trade can make is delving into an obvious option without considering the numerous strategies available.
These strategies not only help you maximize profit, but also minimize your risk to some extent.
If you are concerned about trading advanced options, here are some high probability strategies you should know about.
They help you buy trading options strategically so that you take a calculated risk that suits your market conditions.
Considering that you have a stock that you don’t want to hold onto for an extended period of time.
This may be because you are unsure of future direction.
In this case it is covered call The option can be a great way to sell the stocks while reducing your risk.
For example, you might want to use the call option for a stock that is equal to 100 stocks per call option.
To use the high probability strategy for covered calls, you must sell one call option for every 100 stocks bought.
In this case, even if the price goes up dramatically, you have long call protection against your short call.
Hence the name “covered call”.
The only downside to the covered call trading option is that you should be ready to sell your own stocks at the short strike price.
In simple terms, just buy your target stock as you would in an ideal market situation and at the same time sell a call option on the same stocks to insure yourself in case the price goes up or down.
The put married is another high probability options trading strategy where you protect yourself when your stock’s price falls and generate income from it.
Think of it as an insurance policy.
When purchasing insurance, you pay premiums in advance in the event of an unpleasant accident.
Similarly, using the married put strategy, you acquire some put options along with any risky asset.
Now, by holding a put option, you can even sell the stock you are holding at a strike price.
This ultimately provides risk protection while you hold the stock or asset.
So you won’t suffer any significant damage even if the price of the stocks you bought drops sharply.
Likewise, you can participate in other market opportunities at the same time if the stock you hold increases in value.
However, the married put strategy is not free from drawbacks.
That’s because, as mentioned above, you can never predict exactly how a stock will behave.
If you use the married put option but the price does not go down, you will lose the investment you made in the form of a premium for buying the put options.
The Bull call spread and the Bear put spread are contrasting options trading strategies that you can apply according to the state of the market and your position in the market.
First, if you have a bull position in the market, you can use the bull call spread strategy by buying calls at the strike price.
After that, you sell the exact number of calls purchased at the same time.
However, if you sell the calls, they should be offered at a higher price than the current strike price.
In this way, you are performing a vertical spreading technique.
And if you predict an increase in the share price, you will reduce the premium you are spending significantly.
Second, the bear put spread strategy also involves spreading your holdings vertically.
However, their actions are reversed in technology.
Instead of buying calls, you simply buy put options and sell an equal number of puts in the market.
Mind you; All of this is done at an exercise price that is below the typical cost of the stock.
The bull call spread is intended for bulls who want stock prices to rise.
In contrast, the bear put spread is intended for those who expect their stock prices to decline.
By buying and selling the puts for the same asset with a similar expiration date, you will significantly limit your losses in the event of a price drop.
As the name suggests, you can use this strategy to create one Protective collar to your profits.
To execute this high probability options trading strategy, you need to buy an OTM put option and sell an OTM call option at the same time.
This way, the long put you buy maintains the stability of your potential selling price.
This also reduces the chances of further profits as you may have to sell the stocks you own for a high price.
For example, let’s say you’re betting on 100 shares of a company priced at $ 100.
If the price rises to $ 200 from the next month, you can create a protective collar around your profit by buying a put and a call for the following month.
That way, you’re protected from the current strike price for at least $ 175 before the current strike price expires.
However, you must sell your prices at your call price if the stocks trade before the price expires.
The Long straddle and Long strangulation Options are somewhat similar, but different options for trading options with a high probability for investors who are unsure how their wealth will develop.
There are times on an exchange when an investor is certain that the price range of the assets they hold will change significantly.
But he’s not sure if it will go up or down.
In this situation, the smallest mistake can cost you millions.
This is why you should use the straddle or strangle strategies to ensure the likelihood of your wealth.
To do a long straddle, simply buy a call and a put option on your assets at the same strike price and expiration date.
While doing a long strangle, you’ll have to do more or less the same thing.
Here, however, you buy an OTM call and place options on the same asset with the same exercise price and expiration date.
If you choose to do the straddle, you will get the maximum possible profits when the price goes up.
However, if it goes down, you will only lose the premium cost of the options you bought.
On the other hand, if you go for the strangle option, you will get unlimited winnings, similar to the straddle option.
What makes the Strangle a better option is that if the asset suffers a loss, your loss will be far less.
That’s because you bought OTM options that cost lower premiums.
That concludes our list of the best trading strategies for high probability options for unpredictable stock markets.
In any case, stock markets are always unpredictable.
Buying the right options at the right time can help you reduce the risk factor while maximizing your profits.
However, do not buy trading options without formulating an appropriate strategy.
If you do so, you could suffer significant premium losses.
So make sure you go through these high probability options trading strategies to see which one fits your position and market condition before taking your next move.
Author bio:: Financial wolves is a blog designed to help you make more money to gain financial freedom. After paying off student loans, I shifted my focus to making more money doing sideline jobs, real estate, freelance work, and the online economy. follow us on Pinterest, Youtube, Twitter, and Facebook.
Disclaimer: The information above applies to For educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are unfamiliar with exchange-traded options. All readers interested in this strategy should do their own research and seek advice from a licensed financial advisor.