Stock Options Trading

Securities and currencies have always been popular among traders. And if you use options, then you would have the chance to buy just contracts for such an underlying asset as stocks.

The first stock options appeared at the beginning of the 19th century and were traded on the London Stock Exchange. The novelty reached the United States only at the end of the twentieth century, and very soon, this form of trading in stock options progressed and took the form we can see today. Understanding stock option trading will be easier with this article.

What Is an Option

An option is one of the most complex financial instruments traded on the market. It is a so-called contract where the subject of the trading is not the asset itself, but the right of its preferential sale or purchase. The owner of the option can trade the original asset at a fixed price. And one of the features of the option is that its owner decides whether or not to perform the contract. For this, the trader gets a fee or a premium. Obtaining an option, you buy the chance to trade the asset later at pre-set prices. This price will be the purchase price of the option, and it is called a strike.

Each option has its own duration period and you cannot postpone the deal for as long as you want. The moment when this period is over is called expiration. At this very moment, you either fulfill the conditions of the option, or the option remains unexecuted. This opportunity is not free and you need to pay a so-called option premium. The premium itself might not be a fixed amount and depends on the strike prices and the market price of the main assets, which is constantly changing, as is the option premium, respectively.

Types of Options

Roughly, we may also group options as follows:

  • by type - call options or put options;
  • on the underlying asset - futures, stocks, commodities, currency;
  • by style - European, American and Asian options;
  • by type of settlements - option with premium payment or option without premium payment;
  • based on trading markets.

Options could also be applied to any market asset - commodities, stocks, currency and futures contracts. What are stock options trading nuances? The conditions for making deals on the platforms are standardized for all parameters, except for the option price. Stock options are sold and bought on trading platforms based on the same rules and mechanisms that exist for futures contracts.

Basic Terms in Trading Stock Options

If you are just making the first steps in option stock trading, it is vital to understand the main notions you can come across:

Option strike price.

It is the value at which the same underlying asset can be bought or sold. For making money, the stock price must be higher than the strike price for call options, or lower for put options. And the deal must take place before the option expiration date.

Quoted Options.

Options that are traded on the major options exchanges are called quoted options. These options have a fixed strike price and expiration date. Each quoted option consists of one hundred stocks of a particular company (this option is also called a contract).

Option profitability.

There are three terms that are used when you refer to profitability of the option:

A call option with an original asset price higher than the strike price is often referred to as In-the-money option. Though, it is the opposite situation for a put option, where the stock price is lower than the option strike price.

In other words, the term “in-the-money” is when the sale of an asset under a contract brings profit. The term "at home" is when the sale of an asset does not bring any profit or loss. The term "out-of-money" is when the sale of an asset ends with a loss.

Intrinsic value of an option.

The amount of an option "in the money" is called the "intrinsic value" of the option.

Option premium.

For the opportunity to conclude an option agreement, the buyer pays the seller a certain amount - a premium. The total cost of an option is called the premium. In its economic meaning, the premium is a payment for the right to conclude a deal in the future.

The amount of the premium is usually set as a result of the equalization of supply and demand in the market between buyers and sellers of options. Ideally, the premium should be of such a size that the seller and the buyer might not earn anything and will lose nothing.

The premium is determined by factors such as the stock price, the higher strike price of the deal, the time remaining to expiration (time value), and the range of prices within which the price changes over a given period of time.

Stock Options Trading

Stocks of big companies are often not affordable to an average trader in view of trading volumes, but stock trading options give everyone the opportunity of making money on them.

So what is trading stock options? A stock option is a kind of leverage that allows you to make money on stocks without physically buying them. The buyer of binary options has the right to make money on the price of stocks, their rise or fall. The condition of rise or fall works only for a certain period in case of stock option trading. And the advantages of stock and options trading are obvious:

  • Top stocks for options trading can be purchased at approximately $ 25. And the price for actual stocks start from $ 10,000;
  • A stock option can be purchased for 15 minutes, hour, day, week, month. And actual stocks must be bought for a long term, from six months to 5-10 years, to earn the desired amount.
  • Good stocks for option trading can generate 70% profit in 15 minutes. On a day, you can buy several stock options contracts and get excellent income. And by buying stocks physically, you will receive a maximum 20% per year.
  • Stocks for options trading are available to everyone 24 hours a day. But buying shares is not physically easy and affordable.

About Call/Put Options

The further stock options trading information bit refers to the features of the main option types - Call and Put.

A Call option enables you to buy an asset at a pre-fixed price for a certain time value. It is similar to a long position in stocks: the buyer of this option type expects that the stock will go up significantly before the contracts expire. In other words, a Call option grants one of the parties of the contract, called the option holder, the right to buy the underlying asset at a specified time in the future at a fixed price. It is the concept of a call option.

A Put option gives the trader the prerogative to sell an asset at a specified price within a certain period of time.

A put option is like short positions. In this case, the buyer expects that the stock price will fall before the option expires. So, a Put option gives its holder the ability to sell the stock at a specified time in the future at a fixed price. It is a mechanism of this option type.

The option owner should not necessarily trade the purchased options.

Based on the above, there are 4 key players on the option market:

  • Call option buyers;
  • Call option sellers;
  • Put option buyers;
  • Put options sellers.

These are not only variants on how to do stock options trading. Combinations with options that create new features and opportunities are quite common and attractive among stock market professionals. One of them is the so-called shelving agreement - a combination of long calls and long puts for the same shares and with the same execution price and the same expiration dates. In this case, the seller relies on relative stability, on minimal exchange rate fluctuations. The buyer is betting on its significant change, and he does not care - the price will increase or, conversely, decrease: if only it changed and the more, the better. One of two options is performed - either "call" or "put" (regardless of the price level).

The main advantages of stocks options trading

  • high profitability of deals. By paying a relatively small price for the option, in a favorable case, you could also get a profit that is many times greater than the original investment;
  • very low risk for the trader of the contract (the risk does not exceed the value of the premium) in the possibility of a theoretically unlimited profit;
  • the option trading can involve a diverse set of strategies: to buy and sell options with different execution prices and expiration times in various combinations; work simultaneously in different options markets; work in options and futures markets, etc .;

the ability to trade stock options as well as futures contracts.

Best Brokers for Options Stock Trading

Assets

  • 300+

Minimum deposit

  • 10$

Minimum deal

  • 1$

Profitability

  • 91%

Platforms

  • Own platform

Compatibility

  • Windows, MAC OS, iOS, Android

Deposits / Withdrawal

  • Banking cards (VISA, MasterCard, Maestro);
  • best online payment systems (Skrill, Neteller);
  • E-wallets (Yandex.Money, QIWI, WebMoney);
  • Traditional bank transfer;

Bonuses

  • No

Training

  • A big selection of interactive training tools such as webinars, tutorials, guides, and electronic books.

Assets

  • 114

Minimum deposit

  • 5$

Minimum deal

  • 1$

Profitability

  • 80-100%

Platforms

  • Derive.com
  • SmartTrader
  • TickTrade App

Compatibility

  • Windows, Tick Trade for Android

Deposits / Withdrawal

  • Bank transfers;
  • Credit / Debit Cards; Electronic wallets;

Bonuses

  • Welcome bonus from 10 to 100% (depending on the deposit amount)

Training

  • Training section on the website. It includes some analytical elements.

Assets

  • 72

Minimum deposit

  • 10$

Minimum deal

  • 1$

Profitability

  • 90%

Platforms

  • Web terminal

Compatibility

  • Web, iOS, Android

Deposits / Withdrawal

  • All major payment systems are supported: VISA, MS, QIWI, Neteller, Webmoney, Yandex.Money.

Bonuses

  • Promo codes

Training

  • Academy for beginners

Assets

  • 100

Minimum deposit

  • 10$

Minimum deal

  • 1$

Profitability

  • 96%

Platforms

  • Own platform

Compatibility

  • iOS, Windows XP, Android, MAC

Deposits / Withdrawal

  • Electronic systems;
  • Banking cards;
  • Wire transfer;

Bonuses

  • An individual welcome bonus

Training

  • Electronic book;
  • Social trading;

Assets

  • -

Minimum deposit

  • 0$

Minimum deal

  • 1$

Profitability

  • -

Platforms

  • MT4, MT5, Alpari Mobile, Alpari Invest, Fix-Contracts

Compatibility

  • Web, Alpari Mobile for iOS and Android

Deposits / Withdrawal

  • Bank transfers;
  • Credit / Debit Cards; Electronic wallets;
  • Internal transfers.

Bonuses

  • Loyalty bonus program

Training

  • Alpari higher school of trading;
  • Courses for beginners and experienced traders;
  • Video lessons;
  • Over 50 trading seminars

Assets

  • 2000+

Minimum deposit

  • 100$

Minimum deal

  • 1$

Profitability

  • -

Platforms

  • Web platform, Windows, mobile app;
  • No MT4.

Compatibility

  • Web, iOS, Android

Deposits / Withdrawal

  • Credit card;
  • PayPal and Skrill;
  • Bank transfer

Bonuses

  • Welcome Bonus 30%;
  • $ 20 No Deposit Bonus;

Training

  • Educational center

Stock Trading Vs Option Trading

Even if you are completely new to investing, you probably know what stocks/shares are. A share is an ownership interest in a company. When you buy one or more stocks, you are buying a portion of the company that issued the shares. When you invest in stocks, the goal is to buy the best stocks for options trading at one price and then sell them at a higher price. When you do this, you clearly understand what profit you gain.

Some stocks have an additional benefit of dividend payouts. A dividend is a payment a company makes to you on a regular basis just for owning stock.

What are options in stock trading? When you invest in stock options, you actually acquire the right to trade assets in the form of underlying stocks at an established price in the future. There is no direct ownership of the company at all in this case. There is also no way for you to earn dividends via options. But you would have the opportunity of making money on your other investment. When you invest in stocks, you decide which stocks you might want to buy (or sell) and how many stocks.

Options trading strategy implies a somewhat different process. You will mainly seal with Call and Put options.

Call options make it possible to buy stocks at a fixed price or before the option expires. Think of it as “calling” the stock to you. Put options give you the right to sell stocks at an earlier fixed price or before the expiration. In other words, you are postponing stocks.

Investing in Call Options

When you acquire a call option, you automatically want the original stock to reach the highest volume. You can then use your option, buy the stock at a lower price and sell it for a profit. The strike price is the price you are ready to pay to buy the underlying stocks using a call option. This is a better way to determine if the value of a stock will go up or down. The premium is the amount you pay to get options contracts. When you buy a call option from the seller, you both approve the strike price.

Investing in Put Options

A put option enables you but not forces to sell a specific stock at a specific price per stock for a specific time period. A good way to remember this is that you have the right to "stake" someone a share.

In terms of what you want to do with a put option, this is a callback. By buying put options, you can take advantage of the stock's downward movement. Instead of expecting the price to rise, you want it to fall so that you earn the difference between the strike price and the stock price.

Best Stock for Options Trading

A trader is often puzzled about what are the best stocks for options trading. If you buy stocks, then these are assets of some company like Apple or Amazon. When you come to a trading platform offering the opportunity to trade stock options, you can be often lost as the choice of stocks is huge.  So a trader is often unsure how to start stock market trading.

First, experienced traders suggest not to focus on a brand. Someone actively uses Facebook, someone buys Apple products but loyalty to the brand or a negative attitude towards it should not in any way affect the process of trading in the assets of this company. Because stocks are a financial concept, and no matter how good the goods or services the company offers you, its stocks can go up or down under very different laws and regulations.

Secondly, it is advisable to know something about this company before trading its stocks. This information is not about its products and not about advertising. You should check how long this company has been on the market, who owns its assets, what acquisitions and partnerships it had. This information will not enable you to make specific predictions about price movements, but you will have a good idea of ​​all the processes that can affect these prices.

At present, nothing prevents a trader from buying stocks of any company in the world. It does not matter if the company belongs to one country or another. It is important to focus on the dynamics of price changes in recent years. This parameter allows you to understand which options can be most profitable for trading and for what period.

Many brokerage platforms offer a choice of a large number of stocks, sometimes 30-50 options. So trading such contracts can be recognized as one of the most progressive directions of option trading in general. Stock option trading strategy is not inferior to currencies option trading.

How to Trade Options?

The rapidly growing volume of options trading contributes to the increase in the number of investors. Liberal starting conditions for beginners allows practically everybody to test their skills in trading. But you need to know the main points

Choose a reliable broker

Before making a choice, you should study carefully the main characteristics and features of all platforms available in the market. And only then, based on the priority indicators, build your own rating.

No matter what your preferences are, the following parameters are of utmost importance:

  • good trading conditions;
  • smooth operation of trading platforms;
  • extensive experience, professionalism and efficiency in the work of the brokerage company's staff;
  • legitimate status of the company (regulation, licenses, place of registration, possibility to get in touch with the company's administration, availability of an office and customer support).

Then you should consider the terms of trade. If you are not happy with the offered terms, everything else no longer makes sense. Terms of trade include the following:

  • Types of order execution

A good broker should support the following types of order execution: market execution and instant execution.

  • Speed ​​of reception and processing of applications

Besides ensuring the smooth operation of the trading platform and good communication with servers, the broker must provide high speed processing of deals. In a high-level brokerage company, it takes no more than 3-4 seconds to process an application, and its execution is carried out automatically.

  • The size of call spreads and put spreads

The spread concept is easier to understand on the example of a currency exchange office, which sets two values ​​for buying and selling currency. Respectively, it also offers slightly higher and slightly lower rates compared to the current market rate. The difference between these prices is the earnings of the exchange office. The spread is set by the broker and is often its earnings. The spread can be floating or fixed.

Sometimes a broker prefers to do without a spread, earning a commission on each deal. In any case, a serious brokerage company must have one of two sources of income. Brokers who claim to work for free should arouse the trader's suspicions. It is recommended not to use the services of such companies.

Get full training

Almost all major brokers have a separate section on their sites, which allows you to get acquainted with all the essential nuances of earning on binary options. When the basics are successfully covered, go to the study of stock schemes, which can be determined by technical analysis.

In the final phase, pay attention to the nuances that are hidden in all exchange processes: from the choice of timeframe, and ending with the nature of the chosen trading asset. You will need special literature to find all the required information and not to get bewildered by such terms as long puts or long calls.

Master trading strategies

There are many different strategies, depending on many factors. They can be divided into the following main groups:

  • simple, or basic;
  • spread;
  • combination;
  • synthetic.

Simple strategy works like one option deal, i.e. simple buying or selling of a call or put option.

Spread is the simultaneous opening of two opposite deals for the same type of option with the same asset. In other words, it is the simultaneous buying and selling of a call or put option on the same asset.

Combination approach suggests opening of two identical deals for different types of options with the same asset. In other words, it is the simultaneous purchase (sale) of a call option and a put option on the same asset.

Synthetic strategies are:

  • a) parallel opening of opposite positions on different types of options with the same asset;
  • b) simultaneously opening a position in the physical market of the asset itself and in the options market for this asset These strategies are inherently similar to simple option strategies.

Depending on the expectations of the market behavior, there are “bullish”, “bearish” and neutral policies.

  • Bullish methods are focused on increasing the value of the underlying asset.
  • Bearish technique implies a decrease in the value of the main asset in the future.
  • Neutral approach is used when the price of the main asset is expected to fluctuate around a certain value.

For stock option trading, it is convenient to describe most of the basic strategies through the behavior of profit graphs.

Learn how to make money on a demo account

Once you have chosen a strategy and visually assessed its capabilities, open a demo account with any broker you like. Set yourself a simple task: to increase the trade balance by at least $ 1 in one month. If there are no problems, repeat the procedure several times.

If your strategy has been bringing you money (in any amount) for three months in a row, then you are doing everything right. In this case, you can switch to a real deposit. However, if at least one of the months turned out to be unprofitable, then the whole experiment will need to start again. Do not start trading until profits become stable.

The demo account is an important feature offered by leading options brokers. Virtual trading on the simulator is a unique opportunity to understand whether and how to start trading on stock and shares. And yet, when choosing a trading platform, it is worth considering that not every company has the opportunity to provide a training account.

Build a risk management system

Money management is a higher risk management system. It includes three mandatory aspects:

  • marginal level of risk in one rate (rate 1-3% of the deposit amount);
  • daily number of unprofitable deals, after which the trader must stop trading under any circumstances (doing so you will keep the deposit intact);
  • daily number of profitable trades, after which the user must stop trading (protects the trader from an excessive number of positive emotions).

Each trader has his own acceptable level of risk. It must be pre-calculated, recorded and always kept under control.

Use broker bonuses wisely

A bonus is a marketing tool that allows all brokers to increase the number of their clients. With the help of bonuses, the company solves two strategic tasks:

  • they make traders wanting to replenish the account for a large amount;
  • they make sure that the money is listed on the binary broker's balance sheet for as long as possible.

Each bonus is issued on the basis of some mandatory rules. In most cases, they are not beneficial to a trader who wants to invest in the short term. Therefore, in order to use bonuses correctly - carefully study the conditions of their provision and compare them with your interests.

Stock Options Trading

Securities and currencies have always been popular among traders. And if you use options, then you would have the chance to buy just contracts for such an underlying asset as stocks.

The first stock options appeared at the beginning of the 19th century and were traded on the London Stock Exchange. The novelty reached the United States only at the end of the twentieth century, and very soon, this form of trading in stock options progressed and took the form we can see today. Understanding stock option trading will be easier with this article.

What Is an Option

An option is one of the most complex financial instruments traded on the market. It is a so-called contract where the subject of the trading is not the asset itself, but the right of its preferential sale or purchase. The owner of the option can trade the original asset at a fixed price. And one of the features of the option is that its owner decides whether or not to perform the contract. For this, the trader gets a fee or a premium. Obtaining an option, you buy the chance to trade the asset later at pre-set prices. This price will be the purchase price of the option, and it is called a strike.

Each option has its own duration period and you cannot postpone the deal for as long as you want. The moment when this period is over is called expiration. At this very moment, you either fulfill the conditions of the option, or the option remains unexecuted. This opportunity is not free and you need to pay a so-called option premium. The premium itself might not be a fixed amount and depends on the strike prices and the market price of the main assets, which is constantly changing, as is the option premium, respectively.

Types of Options

Roughly, we may also group options as follows:

  • by type - call options or put options;
  • on the underlying asset - futures, stocks, commodities, currency;
  • by style - European, American and Asian options;
  • by type of settlements - option with premium payment or option without premium payment;
  • based on trading markets.

Options could also be applied to any market asset - commodities, stocks, currency and futures contracts. What are stock options trading nuances? The conditions for making deals on the platforms are standardized for all parameters, except for the option price. Stock options are sold and bought on trading platforms based on the same rules and mechanisms that exist for futures contracts.

Basic Terms in Trading Stock Options

If you are just making the first steps in option stock trading, it is vital to understand the main notions you can come across:

Option strike price.

It is the value at which the same underlying asset can be bought or sold. For making money, the stock price must be higher than the strike price for call options, or lower for put options. And the deal must take place before the option expiration date.

Quoted Options.

Options that are traded on the major options exchanges are called quoted options. These options have a fixed strike price and expiration date. Each quoted option consists of one hundred stocks of a particular company (this option is also called a contract).

Option profitability.

There are three terms that are used when you refer to profitability of the option:

A call option with an original asset price higher than the strike price is often referred to as In-the-money option. Though, it is the opposite situation for a put option, where the stock price is lower than the option strike price.

In other words, the term “in-the-money” is when the sale of an asset under a contract brings profit. The term "at home" is when the sale of an asset does not bring any profit or loss. The term "out-of-money" is when the sale of an asset ends with a loss.

Intrinsic value of an option.

The amount of an option "in the money" is called the "intrinsic value" of the option.

Option premium.

For the opportunity to conclude an option agreement, the buyer pays the seller a certain amount - a premium. The total cost of an option is called the premium. In its economic meaning, the premium is a payment for the right to conclude a deal in the future.

The amount of the premium is usually set as a result of the equalization of supply and demand in the market between buyers and sellers of options. Ideally, the premium should be of such a size that the seller and the buyer might not earn anything and will lose nothing.

The premium is determined by factors such as the stock price, the higher strike price of the deal, the time remaining to expiration (time value), and the range of prices within which the price changes over a given period of time.

Stock Options Trading

Stocks of big companies are often not affordable to an average trader in view of trading volumes, but stock trading options give everyone the opportunity of making money on them.

So what is trading stock options? A stock option is a kind of leverage that allows you to make money on stocks without physically buying them. The buyer of binary options has the right to make money on the price of stocks, their rise or fall. The condition of rise or fall works only for a certain period in case of stock option trading. And the advantages of stock and options trading are obvious:

  • Top stocks for options trading can be purchased at approximately $ 25. And the price for actual stocks start from $ 10,000;
  • A stock option can be purchased for 15 minutes, hour, day, week, month. And actual stocks must be bought for a long term, from six months to 5-10 years, to earn the desired amount.
  • Good stocks for option trading can generate 70% profit in 15 minutes. On a day, you can buy several stock options contracts and get excellent income. And by buying stocks physically, you will receive a maximum 20% per year.
  • Stocks for options trading are available to everyone 24 hours a day. But buying shares is not physically easy and affordable.

About Call/Put Options

The further stock options trading information bit refers to the features of the main option types - Call and Put.

A Call option enables you to buy an asset at a pre-fixed price for a certain time value. It is similar to a long position in stocks: the buyer of this option type expects that the stock will go up significantly before the contracts expire. In other words, a Call option grants one of the parties of the contract, called the option holder, the right to buy the underlying asset at a specified time in the future at a fixed price. It is the concept of a call option.

A Put option gives the trader the prerogative to sell an asset at a specified price within a certain period of time.

A put option is like short positions. In this case, the buyer expects that the stock price will fall before the option expires. So, a Put option gives its holder the ability to sell the stock at a specified time in the future at a fixed price. It is a mechanism of this option type.

The option owner should not necessarily trade the purchased options.

Based on the above, there are 4 key players on the option market:

  • Call option buyers;
  • Call option sellers;
  • Put option buyers;
  • Put options sellers.

These are not only variants on how to do stock options trading. Combinations with options that create new features and opportunities are quite common and attractive among stock market professionals. One of them is the so-called shelving agreement - a combination of long calls and long puts for the same shares and with the same execution price and the same expiration dates. In this case, the seller relies on relative stability, on minimal exchange rate fluctuations. The buyer is betting on its significant change, and he does not care - the price will increase or, conversely, decrease: if only it changed and the more, the better. One of two options is performed - either "call" or "put" (regardless of the price level).

The main advantages of stocks options trading

  • high profitability of deals. By paying a relatively small price for the option, in a favorable case, you could also get a profit that is many times greater than the original investment;
  • very low risk for the trader of the contract (the risk does not exceed the value of the premium) in the possibility of a theoretically unlimited profit;
  • the option trading can involve a diverse set of strategies: to buy and sell options with different execution prices and expiration times in various combinations; work simultaneously in different options markets; work in options and futures markets, etc .;

the ability to trade stock options as well as futures contracts.

Best Brokers for Options Stock Trading

Assets

  • 300+

Minimum deposit

  • 10$

Minimum deal

  • 1$

Profitability

  • 91%

Platforms

  • Own platform

Compatibility

  • Windows, MAC OS, iOS, Android

Deposits / Withdrawal

  • Banking cards (VISA, MasterCard, Maestro);
  • best online payment systems (Skrill, Neteller);
  • E-wallets (Yandex.Money, QIWI, WebMoney);
  • Traditional bank transfer;

Bonuses

  • No

Training

  • A big selection of interactive training tools such as webinars, tutorials, guides, and electronic books.

Assets

  • 114

Minimum deposit

  • 5$

Minimum deal

  • 1$

Profitability

  • 80-100%

Platforms

  • Derive.com
  • SmartTrader
  • TickTrade App

Compatibility

  • Windows, Tick Trade for Android

Deposits / Withdrawal

  • Bank transfers;
  • Credit / Debit Cards; Electronic wallets;

Bonuses

  • Welcome bonus from 10 to 100% (depending on the deposit amount)

Training

  • Training section on the website. It includes some analytical elements.

Assets

  • 72

Minimum deposit

  • 10$

Minimum deal

  • 1$

Profitability

  • 90%

Platforms

  • Web terminal

Compatibility

  • Web, iOS, Android

Deposits / Withdrawal

  • All major payment systems are supported: VISA, MS, QIWI, Neteller, Webmoney, Yandex.Money.

Bonuses

  • Promo codes

Training

  • Academy for beginners

Assets

  • 100

Minimum deposit

  • 10$

Minimum deal

  • 1$

Profitability

  • 96%

Platforms

  • Own platform

Compatibility

  • iOS, Windows XP, Android, MAC

Deposits / Withdrawal

  • Electronic systems;
  • Banking cards;
  • Wire transfer;

Bonuses

  • An individual welcome bonus

Training

  • Electronic book;
  • Social trading;

Assets

  • -

Minimum deposit

  • 0$

Minimum deal

  • 1$

Profitability

  • -

Platforms

  • MT4, MT5, Alpari Mobile, Alpari Invest, Fix-Contracts

Compatibility

  • Web, Alpari Mobile for iOS and Android

Deposits / Withdrawal

  • Bank transfers;
  • Credit / Debit Cards; Electronic wallets;
  • Internal transfers.

Bonuses

  • Loyalty bonus program

Training

  • Alpari higher school of trading;
  • Courses for beginners and experienced traders;
  • Video lessons;
  • Over 50 trading seminars

Assets

  • 2000+

Minimum deposit

  • 100$

Minimum deal

  • 1$

Profitability

  • -

Platforms

  • Web platform, Windows, mobile app;
  • No MT4.

Compatibility

  • Web, iOS, Android

Deposits / Withdrawal

  • Credit card;
  • PayPal and Skrill;
  • Bank transfer

Bonuses

  • Welcome Bonus 30%;
  • $ 20 No Deposit Bonus;

Training

  • Educational center

Stock Trading Vs Option Trading

Even if you are completely new to investing, you probably know what stocks/shares are. A share is an ownership interest in a company. When you buy one or more stocks, you are buying a portion of the company that issued the shares. When you invest in stocks, the goal is to buy the best stocks for options trading at one price and then sell them at a higher price. When you do this, you clearly understand what profit you gain.

Some stocks have an additional benefit of dividend payouts. A dividend is a payment a company makes to you on a regular basis just for owning stock.

What are options in stock trading? When you invest in stock options, you actually acquire the right to trade assets in the form of underlying stocks at an established price in the future. There is no direct ownership of the company at all in this case. There is also no way for you to earn dividends via options. But you would have the opportunity of making money on your other investment. When you invest in stocks, you decide which stocks you might want to buy (or sell) and how many stocks.

Options trading strategy implies a somewhat different process. You will mainly seal with Call and Put options.

Call options make it possible to buy stocks at a fixed price or before the option expires. Think of it as “calling” the stock to you. Put options give you the right to sell stocks at an earlier fixed price or before the expiration. In other words, you are postponing stocks.

Investing in Call Options

When you acquire a call option, you automatically want the original stock to reach the highest volume. You can then use your option, buy the stock at a lower price and sell it for a profit. The strike price is the price you are ready to pay to buy the underlying stocks using a call option. This is a better way to determine if the value of a stock will go up or down. The premium is the amount you pay to get options contracts. When you buy a call option from the seller, you both approve the strike price.

Investing in Put Options

A put option enables you but not forces to sell a specific stock at a specific price per stock for a specific time period. A good way to remember this is that you have the right to "stake" someone a share.

In terms of what you want to do with a put option, this is a callback. By buying put options, you can take advantage of the stock's downward movement. Instead of expecting the price to rise, you want it to fall so that you earn the difference between the strike price and the stock price.

Best Stock for Options Trading

A trader is often puzzled about what are the best stocks for options trading. If you buy stocks, then these are assets of some company like Apple or Amazon. When you come to a trading platform offering the opportunity to trade stock options, you can be often lost as the choice of stocks is huge.  So a trader is often unsure how to start stock market trading.

First, experienced traders suggest not to focus on a brand. Someone actively uses Facebook, someone buys Apple products but loyalty to the brand or a negative attitude towards it should not in any way affect the process of trading in the assets of this company. Because stocks are a financial concept, and no matter how good the goods or services the company offers you, its stocks can go up or down under very different laws and regulations.

Secondly, it is advisable to know something about this company before trading its stocks. This information is not about its products and not about advertising. You should check how long this company has been on the market, who owns its assets, what acquisitions and partnerships it had. This information will not enable you to make specific predictions about price movements, but you will have a good idea of ​​all the processes that can affect these prices.

At present, nothing prevents a trader from buying stocks of any company in the world. It does not matter if the company belongs to one country or another. It is important to focus on the dynamics of price changes in recent years. This parameter allows you to understand which options can be most profitable for trading and for what period.

Many brokerage platforms offer a choice of a large number of stocks, sometimes 30-50 options. So trading such contracts can be recognized as one of the most progressive directions of option trading in general. Stock option trading strategy is not inferior to currencies option trading.

How to Trade Options?

The rapidly growing volume of options trading contributes to the increase in the number of investors. Liberal starting conditions for beginners allows practically everybody to test their skills in trading. But you need to know the main points

Choose a reliable broker

Before making a choice, you should study carefully the main characteristics and features of all platforms available in the market. And only then, based on the priority indicators, build your own rating.

No matter what your preferences are, the following parameters are of utmost importance:

  • good trading conditions;
  • smooth operation of trading platforms;
  • extensive experience, professionalism and efficiency in the work of the brokerage company's staff;
  • legitimate status of the company (regulation, licenses, place of registration, possibility to get in touch with the company's administration, availability of an office and customer support).

Then you should consider the terms of trade. If you are not happy with the offered terms, everything else no longer makes sense. Terms of trade include the following:

  • Types of order execution

A good broker should support the following types of order execution: market execution and instant execution.

  • Speed ​​of reception and processing of applications

Besides ensuring the smooth operation of the trading platform and good communication with servers, the broker must provide high speed processing of deals. In a high-level brokerage company, it takes no more than 3-4 seconds to process an application, and its execution is carried out automatically.

  • The size of call spreads and put spreads

The spread concept is easier to understand on the example of a currency exchange office, which sets two values ​​for buying and selling currency. Respectively, it also offers slightly higher and slightly lower rates compared to the current market rate. The difference between these prices is the earnings of the exchange office. The spread is set by the broker and is often its earnings. The spread can be floating or fixed.

Sometimes a broker prefers to do without a spread, earning a commission on each deal. In any case, a serious brokerage company must have one of two sources of income. Brokers who claim to work for free should arouse the trader's suspicions. It is recommended not to use the services of such companies.

Get full training

Almost all major brokers have a separate section on their sites, which allows you to get acquainted with all the essential nuances of earning on binary options. When the basics are successfully covered, go to the study of stock schemes, which can be determined by technical analysis.

In the final phase, pay attention to the nuances that are hidden in all exchange processes: from the choice of timeframe, and ending with the nature of the chosen trading asset. You will need special literature to find all the required information and not to get bewildered by such terms as long puts or long calls.

Master trading strategies

There are many different strategies, depending on many factors. They can be divided into the following main groups:

  • simple, or basic;
  • spread;
  • combination;
  • synthetic.

Simple strategy works like one option deal, i.e. simple buying or selling of a call or put option.

Spread is the simultaneous opening of two opposite deals for the same type of option with the same asset. In other words, it is the simultaneous buying and selling of a call or put option on the same asset.

Combination approach suggests opening of two identical deals for different types of options with the same asset. In other words, it is the simultaneous purchase (sale) of a call option and a put option on the same asset.

Synthetic strategies are:

  • a) parallel opening of opposite positions on different types of options with the same asset;
  • b) simultaneously opening a position in the physical market of the asset itself and in the options market for this asset These strategies are inherently similar to simple option strategies.

Depending on the expectations of the market behavior, there are “bullish”, “bearish” and neutral policies.

  • Bullish methods are focused on increasing the value of the underlying asset.
  • Bearish technique implies a decrease in the value of the main asset in the future.
  • Neutral approach is used when the price of the main asset is expected to fluctuate around a certain value.

For stock option trading, it is convenient to describe most of the basic strategies through the behavior of profit graphs.

Learn how to make money on a demo account

Once you have chosen a strategy and visually assessed its capabilities, open a demo account with any broker you like. Set yourself a simple task: to increase the trade balance by at least $ 1 in one month. If there are no problems, repeat the procedure several times.

If your strategy has been bringing you money (in any amount) for three months in a row, then you are doing everything right. In this case, you can switch to a real deposit. However, if at least one of the months turned out to be unprofitable, then the whole experiment will need to start again. Do not start trading until profits become stable.

The demo account is an important feature offered by leading options brokers. Virtual trading on the simulator is a unique opportunity to understand whether and how to start trading on stock and shares. And yet, when choosing a trading platform, it is worth considering that not every company has the opportunity to provide a training account.

Build a risk management system

Money management is a higher risk management system. It includes three mandatory aspects:

  • marginal level of risk in one rate (rate 1-3% of the deposit amount);
  • daily number of unprofitable deals, after which the trader must stop trading under any circumstances (doing so you will keep the deposit intact);
  • daily number of profitable trades, after which the user must stop trading (protects the trader from an excessive number of positive emotions).

Each trader has his own acceptable level of risk. It must be pre-calculated, recorded and always kept under control.

Use broker bonuses wisely

A bonus is a marketing tool that allows all brokers to increase the number of their clients. With the help of bonuses, the company solves two strategic tasks:

  • they make traders wanting to replenish the account for a large amount;
  • they make sure that the money is listed on the binary broker's balance sheet for as long as possible.

Each bonus is issued on the basis of some mandatory rules. In most cases, they are not beneficial to a trader who wants to invest in the short term. Therefore, in order to use bonuses correctly - carefully study the conditions of their provision and compare them with your interests.

Highly Recommended

IQ Option

This is the leading binary options trading platform at the moment. There is a comprehensive selection of these binary trades, with instruments like Forex, ETFs, and crypto amongst others.

The platform itself is a big draw for traders, with heaps of options and tools across the variety of instruments. This is offered through an application as well and with a free demo option for traders to learn. This is a full package online broker platform.

Min Deposit:10$

Min Deal:1$

Demo:YES

Binary.com

As the name suggests, Binary.com specializes in the art of binary trading. One of the leaders in the field, this group has done a lot to promote and grow this sector of the marketplace.

They also offer Stocks, CFDs, Forex and some crypto trading. This is a broad delivery on the different variety available and provides some flexibility for their users. There is also an app and demo account attached to this online broker.

Min Deposit:5$

Min Deal:1$

Demo:YES

Olymp Trade

Olymp Trade is another online broker that is commonly referred to in the field of Binary Options. They unfortunately have a limited range in terms of the different types of binary choices.

With access to instruments like Stocks, ETFs, Commodities and crypto, this platform does have a decent selection available. They also include the classic demo option wrapped up in their offering.

Min Deposit:10$

Min Deal:1$

Demo:YES

ExpertOption

ExpertOption is a newer online broker on the market and has seen a burst of popularity in the last while. They have a smattering of instruments, including Stocks, CFDs, Forex and some crypto.

Unfortunately, they do not have any options trading for those looking for the binary variant. This lack of the popular instrument finds it wanting for those that are looking for this type of action.

Min Deposit:10$

Min Deal:1$

Demo:YES

Alpari

This online broker has been a top player in the market for a while, with their range of instruments and different account types appealing to many. The downside of this is that each of the accounts are specifically targeted and therefore lack freedom across all the options.

In most other regards, this is a suitable platform to engage with instruments like Forex, Indices, commodities, and shares. They also have access to a demo account that can help new traders figure out the ropes.

Min Deposit:0$

Min Deal:1$

Demo:Yes

Plus 500

This broker has a great selection of assets to trade on. With CFDs for securities on Forex, crypto, commodities, indices, and options. There is a little bit of something for most traders.

Plus 500 only has two account options, with their professional account offering more options and greater leverage. Like with most of these trading platforms, there is also a demo account for users. Their deposit requirements are higher than many other top platforms.

Min Deposit:100$

Min Deal:Fixed spreads

Demo:Yes

Highly Recommended
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