How to Execute Options Trades

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By www.TraderNewsandReviews.com

www.TraderNewsandReviews.com

You may have picked the most promising options to trade and still lose out if you do not buy and sell at the most opportune times.

How to execute options trades is often more important than how to pick options trades.

As we mentioned in our article about picking options to trade there are two approaches to execution.

One is that you learn the ropes and do it all yourself and the other is that you use a professional service that picks what options to trade and emails you step by step instructions that you can either execute or read word for word to your broker.

The best way is probably what you get with a service like Pivotal Cash Bonanza where you get step by step instructions for how to execute options trades for starters.

And you also get software and the education that you need to do the job yourself.

How to Execute Options Trades

Starting with the basics let’s consider a call option.

For beginners: a call is an option contract that allows you to buy an underlying asset such as a stock at a set price, called the strike price.

When buying call options on stocks a standard contract is for 100 shares of the stock.

When you buy the call option you will have the right to purchase these shares at the strike price no matter how high the market price might go and this right lasts until the contract expires.

If the stock fails to go up in price you can let the contract expire and your only cost is the premium you paid for the contract.

Or you could sell the contract and perhaps receive a small premium in return.

The ideal situation is that the stock price goes up and you make a nice profit.

First step: Compare the current stock price and the strike price of the option.

If the stock price is higher than the strike price the option is “in the money.”

If the opposite is true the option is “out of the money.”

The option price will reflect this as well as the amount of time left until the contract expires.

In the money options are worth something and out of the money options have no current value.

But they may have what is called time value.

That is to say time remains on the contract and the stock could still go up in price.

Second step: When you buy a call option and the stock price goes up it now is in the money.

You have two choices. One is to execute the contract at the strike price and buy the stock which you can keep or sell.

When you sell you will make a profit as the market price is more than the strike price.

Alternatively you can sell your contract for a profit.

Do the arithmetic and follow the path to greater profits.

Timing is the key to profits in trading calls, puts or combinations of the two.

Not only does the trader need to keep an eye on events that will drive the value of the underlying stock but he or she also needs to watch the market for the momentary inefficiencies that spell profit for the savvy trader.

Until you have the knowledge and experience to set up and execute your own trades it is best to rely on a service such as Pivotal Cash Bonanza both for specific trades and to learn the ropes to do it all yourself.

For more insights and useful information about trading, visit

How to Execute Options Trades

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