Options trading

Saxo Capital markets provide stock options that help investors and online traders benefit even when trading prices are falling. These trading equity options are aimed at mitigating risks while providing forex traders with more exposure to global markets on their platforms.

Traders go for options trading online in cases where they need protection. Using equity options helps protect the portfolio of most traders from markets that are declining. These options are used as a building block by Australian traders to position themselves in markets that may be falling, therefore, offering them protection when fluctuation hits.

Some of the investor trading strategies used are discussed as follows:-

1.    The call option

Under this, there are two type of call options namely the long call and short call option. The long call option is a strategy often used when a trader believes that the price of the stock is likely to go up beyond the strike price prior to the date of expiration. This strategy is effective in that the call option acquires leverage with the appreciation of low priced calls.

Despite the fact that this strategy works, it has a limited lifespan. In case the underlying stock price does not go above the strike price prior to the date of expiration, the call option expires.

2.    The bear Put Spread option

Here, a Forex trader with etx buys a high striking in the money put option and later sells a lower striking option of the same security as the date of expiration. While trading forex with etx, the trader employs this strategy with the belief that the price of the underlying asset will go down with time.

3.    The bull call spread option

This strategy is used by forex traders whereby they predict that the price of the asset might go up soon. Here, a trader buys an at- the- money- call option while at the same time writing a higher striking out of the money call option of the same moth of expiry.

4.    The Covered call

This strategy works by writing the call options against the underlying security. This strategy helps online traders with forex etx benefit through earning premium writing calls. They also get to enjoy stock ownership benefits such as voting rights and dividends. Investors here are not able to gain from a rise in the price of the asset since the potential of covered call is limited in return for the premium.

5.    The log put option

Investors use this strategy with the faith that the price of the underlying will go below the strike price prior to the date of expiration. Traders here bet against the underlying by purchasing put options. The traders however have to pay for premiums for the put options making it risky.

6.    Novice Option

Here, online Forex traders are given the chance to buy calls and puts as a way of predicting the rise or fall of a certain market. By taking this chance, it gives an opportunity to respond to changes that may affect trading

7.    The Long Straddle

This strategy is believed to be neutral since the buying of a put and a call of the same asset, the strike price go hand in hand with the expiration date. Here, the trader tends to believe that the asset will be volatile sooner than later.

8.    The Naked call writing

Though risky, Forex traders with etx sometimes use this strategy where they end up selling calls against another person’s stock. Here, the trader does not actually own the underlying stock but goes ahead to write out of the money calls.

9.    Risk Reversal

This is an option strategy commonly used for Forex Traders with etx to hold shares of the assets while at the same time purchasing protective puts and selling call options against holding. For it to work, the puts and calls should be both out of money options and must have the same date of expiration. This strategy is beneficial to a trader who intends to earn premium while writing covered call. It protects such a trader from a drop in prices of the assets.