Your SlideShare is downloading. ×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Execution of Options Trades

107

Published on

http://www.options-trading-education.com/7043/execution-of-options-trades/ …

http://www.options-trading-education.com/7043/execution-of-options-trades/

Execution of Options Trades

Although an options contract may not expire for months, its value can vary significantly from day to day and even hour to hour. Thus the execution of options trades in a professional and timely fashion is what leads to profits. A profitable option trade is based on a good knowledge of the fundamentals of the stock, commodity or currency that underlies the options contract. It is based on a sound analysis of market sentiment. But optimal profits come from execution of options trades at the very best time and manner.

Overview and Sense of the Market
Let us say that you purchased a call of XYZ Company. You paid $3 a share or $300 for the contract. The stock was selling at $78 a share when you purchased the option. You did so because you believed that the stock would rise in price and you were right. The stock is now selling for $91 a share and your call option is now worth $16 a share. If you sell right now you can make a nice profit. But, will the stock go higher? Or, might it correct and fall? The same analysis that gave you the insight to buy a call on XYZ in the first place is useful in deciding whether to say in the call contract or sell. If you believe that the fundamentals of XYZ warrant a higher rise in the stock you probably want to stay. If you think that market sentiment will continue to drive the stock higher you will want to stay with the contract and not sell. And, if you would like to sleep at night without worrying that the stock will gap down upon opening tomorrow morning, you may simply decide to sell and take your profits.

Published in: News & Politics
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
107
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
3
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Execution of Options TradesBY www.options-trading-education.com/
  • 2. Although an options contract may not expire for months, its value can vary significantly from day to day and even hour to hour.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 3. Thus the execution of options trades in a professional and timely fashion is what leads to profits.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 4. A profitable option trade is based on a good knowledge of the fundamentals of the stock, commodity or currency that underlies the options contract.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 5. It is based on a sound analysis of market sentiment.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 6. But optimal profits come from execution of options trades at the very best time and manner.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 7. Overview and Sense of the Markethttp://www.options-trading-education.com/7043/execution-of-options-trades/
  • 8. Let us say that you purchased a call of XYZ Company.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 9. You paid $3 a share or $300 for the contract.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 10. The stock was selling at $78 a share when you purchased the option.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 11. You did so because you believed that the stock would rise in price and you were right.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 12. The stock is now selling for $91 a share and your call option is now worth $16 a share.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 13. If you sell right now you can make a nice profit.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 14. But, will the stock go higher? Or, might it correct and fall?http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 15. The same analysis that gave you the insight to buy a call on XYZ in the first place is useful in deciding whether to say in the call contract or sell.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 16. If you believe that the fundamentals of XYZ warrant a higher rise in the stock you probably want to stay.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 17. If you think that market sentiment will continue to drive the stock higher you will want to stay with the contract and not sell.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 18. And, if you would like to sleep at night without worrying that the stock will gap down upon opening tomorrow morning, you may simply decide to sell and take your profits.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 19. Good Trading Habitshttp://www.options-trading-education.com/7043/execution-of-options-trades/
  • 20. In a volatile market a trader can make a lot of money in commodity, currency, or stock option trading.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 21. He or she can also see profits evaporate in a heartbeat with the execution of options trades as the market corrects.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 22. A good trading habit when trading online is to always set trading stops along with entering an order.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 23. For those trading over a longer time frame limit orders are also useful.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 24. However, in trading online a trader will continually reset the stops as the option in question rises or falls in price.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 25. This is because of the extreme volatility that sometimes drives prices in a saw tooth pattern up and down.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 26. When a trader expects the value of his options contract to continue to rise he will want to stay in the position.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 27. However, as nothing in life or trading is certain, he will also set a stop to sell the stock if it falls.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 28. However, the normal up and down variation of a rising stock can be such that at trader will losehttp://www.options-trading-education.com/7043/execution-of-options-trades/
  • 29. his position immediate before another big rise if his lower trading stop is set too close to the current price.http://www.options-trading-education.com/7043/execution-of-options-trades/
  • 30. The precise setting of trading stops is perhaps a much art as science and typically improves with the continual execution of options trades.http://www.options-trading-education.com/7043/execution-of-options-trades/

×