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Tip!
Another good thing about trading options is that you can make money
no matter what the market is doing, once you become familiar with a
variety of option strategies. It doesn't matter whether you feel the
market is bullish, bearish or even drifting sideways; there are
opportunities to make money with options trading.
1. Buy at or close to the
money
Don't take the long shot; buy at or in the money options, in strongly
trending markets. This way you have time for the trend to take a
correction and move in the right direction and keep in mind a trend in
motion is more likely to continue than reverse. If you do this, the
odds are more in your favor and that what
currency options' trading is
all about. Brokers and guru's like to tempt you with the long shots
and appeal to your greed, Don't listen, stay with at or in the money
currency options and only trade trending markets - this scenario is
where your chances of success are highest.
2. Get time on your side
FACT: The shorter the time to expiry of currency options the greater
the affect of time decay. Many traders think these options are cheaper
(they are in terms of cost) but not in their odds of success! Make
sure you give yourself plenty of time and keep it on your side. Buying
in or at the money currency options with a lot of time value costs you
in terms of profit potential. However, potential that does not become
cash in your bank is just that - potential. Keep in mind the horse
betting scenario earlier. Do you know someone who bets on the outsider
and wins consistently? I don't. Keep profit potential realistic. Ok,
so you have less profit potential, but you have greater odds of
success.
Now let's look at the best strategy
of all.
3. How to trade with odds of
90% success
Consider this 90% of currency options bought expire worthless. On the
other hand, the person who has sold the option has profit odds of 90%.
The real way to make money is selling options. What options do you
sell? You guessed it already! Options out of the money with short time
to expiry. In reality option selling looks a bad bet - unlimited risk
for a limited reward, but keep in mind the odds are hugely stacked in
your favor. Huge consistent gains.
To sell currency options you need to
be well capitalized and take short term swings against you. However,
if you sell out the money options with time decay killing them and you
spread your risk, you can pile up huge gains over time. The above is
not rocket science! Its common sense, you don't get anything for
nothing in financial markets and limited risk and the unlimited
rewards of currency options comes at a cost. Understand this and you
are well on your way to making big gains in currency options. If you
are small trader be patient and take the high odds of success for
lower potential gains. If you are large trader sell options and take
advantage of the majority of mug traders who are keen to give you
their money.
Currency
options can make you money follow the above and get the odds on your
side, that's all you can do in financial trading
and over time you could pile up some huge profits. Good luck!
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