In Singapore, investors often buy or sell options, like Options Trading Singapore: Options Trading Singapore: Call and Put Options + Strategies as part of a short-term trading strategy that helps them make money. Options can be confusing for people who are just starting out, especially if they don’t know why, how, or when to trade them.
But it’s a good thing to be patient, not just in our personal lives but also in our investment journey. By investing for the long term, investors who are patient enough to hold a basket of strong stocks and/or ETFs can ride out short-term market ups and downs.
At the same time, just because we think long-term investing is a good idea doesn’t mean that you should never use short-term trading tools. Options trading is becoming more popular and easier to get into. This means that long-term investors could increase their returns, both in the short term and the long term.
Table of Contents
1. Option Trading Strategy 1 (Buy Put): Protecting Our Portfolio from Losses
As long-term investors, we might not care as much about the timing of the market and just want to invest regularly. We also don’t want to invest right before a market crash, which is especially true when markets are unstable.
These risks can be lessened with options like Options Trading Singapore: Call and Put Options + Strategies. For instance, let’s say we buy 100 Apple shares today for $175 each. But we worry that the market might crash. After all, people talk a lot about worries about inflation, the trade war between the US and China, and the fact that tech stocks are too expensive.
We can buy a put option for US$157.50 in addition to our investment (effectively limiting our downside to a maximum loss of about 10 percent ). This lets us enjoy the gains while lowering the risk of bad or unlucky short-term market timing.
2. Strategy 2 for trading options is to sell put options on stocks. We want to buy already.
We may want to buy stocks or ETFs on a regular basis if we are long-term investors. Put options can help us get a better return on our investments.
For example, let’s say we want to buy 100 Apple shares every three months. During the quarter, we can just sell a put option with a price that is a little lower than the current price. The benefit is that we’ll get a small premium up front, and we’ll be able to buy Apple shares at a slightly lower price than if we bought them today.
3. Option Trading Strategy 3 (Buy Call): Using options to replace some of our portfolio Instead
The third thing we could do is use options instead of buying the stocks they are based on Options Trading Singapore: Call and Put Options + Strategies.
For example, we might think that the price of Apple stock will go up. We can buy a call option on 100 Apple shares for US$177.50 by paying a premium of US$201. This option will expire in about 10 days. Buying 100 Apple shares would cost us US$17,500.
If we’re wrong and Apple’s stock price goes down or doesn’t go above US$177.50, we don’t have to buy any more shares. In this case, we will just lose the call option’s premium of US$201.
4. Strategy 4 for trading options is to sell covered calls. To Earn A Regular Premium
Using call options, we can “rent out” stocks we already own and get paid for it. People often call this strategy “selling covered calls.” Its one of the best Options Trading Singapore: Call and Put Options + Strategies
Again, let’s say we buy 100 shares of Apple today for US$175. We can sell a covered call option right away, which gives the buyer the right to buy our Apple shares if the stock price goes above the strike price. For example, we don’t think the price of Apple stock will go up by more than 10% in the next 10 days. We can sell a covered call with a strike price of US$190, which is about a 10% premium over the current price, and get US$42 up front.
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