5 Options Trading Strategies for Beginners [Higher Return, Lower Risk]
Everything you need to know to trade options and five options strategies that will lower your risk and make more money. You will definitely want to bookmark this video for reference.
Options can seem too complicated for beginners. I know it was one of my least favorite subjects while studying for the Chartered Financial Analyst (CFA) designation. These stock derivatives can be your best strategies though for lowering risk on stocks and making more money. For example, on one option trade, I was able to make over $18,000 on SPY put options that helped offset the stock market crash in March.
And these options trading strategies really aren’t that difficult to understand once you get the basics down. There are only two types of options, calls and puts. Once you understand the basics, you can mix and match them to do anything and become a professional investor.
I’m making this video an all-in-one guide to options investing. We’ll start with everything you need to understand options basics, an options trading for beginners course that will set you up for those strategies. I’ll cover lots of options examples using Apple and Tesla to make it all easily understandable.
I’ll then show you how to invest in options and different scenarios when options trading is better than stocks. Finally, I’ll reveal the five options trading strategies I use to reduce risk and make higher returns.
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I’ll leave a clickable index below if you want to jump around but please watch the whole video. You need to understand the options trading basics if you’re going to use the trading strategies to their full potential.
This is an extremely long video. Give yourself some time, book mark the video and watch it a couple of times to make sure you fully understand each strategy. I guarantee, spend the time you need to learn this options trading tutorial and it will be a tool you use constantly to make better investing decisions.
0:00 Options Trading for Beginners
2:38 What are Options? Options are called derivatives because they derive their price from another investment, in this case from the price of a stock.
3:00 Apple Options Example
5:10 What are Call Options? Call options give you the right to buy shares of stock at a certain price (strike price) on a certain day. For this right, you pay a premium to buy the call option.
7:00 What are Put Options? Put options give you the right to sell shares of stock at a certain price on a certain day.
7:54 Why Do Investors Use Options? Options can help you make leveraged returns, reduce risk in an investment and profit from direction of a stock price either higher or lower.
8:47 Options Trading Basics
9:00 Options Trading Definitions: Expiration, Strike Price, In-the-Money, Out-of-the-Money
Options Trading Strategies
15:00 What are Call Options?
15:40 Pros and Cons of Call Options Trading
16:38 What are Put Options?
17:40 What is a Cash-Secured Put Option Strategy?
21:00 Covered Calls – involve buying shares of the stock and selling call options to offset a near-term loss of price.
30:50 Protective Puts – involve buying shares of stock and buying put options to protect completely from a downside in the shares.
35:45 Option Spreads – involve buying or selling puts and calls for the same month and are a great way to profit from the direction of stock prices while cutting the cost of buying options.
42:45 Option Straddles – involves buying both the call and put options and give you the opportunity to profit from a large move in shares of a stock.
46:35 Option Collars – involve the protective put options trading strategy along with the covered call at the same time to reduce the overall cost.
50:05 How to Trade Options
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Joseph Hogue, CFA spent nearly a decade as an investment analyst for institutional firms and banks. He now helps people understand their financial lives through debt payoff strategies, investing and ways to save more money. He has appeared on Bloomberg and on sites like CNBC and Morningstar. He holds the Chartered Financial Analyst (CFA) designation and is a veteran of the Marine Corps.