When you first start trading options, it is very important to start slowly and gradually build income. Start small-scale transactions and strive to maintain a stable income stream to reduce costs. When you accumulate more experience, you can increase the scale of the transaction. Speaking of common sense and strategy of options, it is very important for investors who need to build confidence and reduce pressure.

Become an expert on the trend of asset prices and scale changes.

Sometimes, the directness of option trading may be deceptive. Although in fact, you only need to predict the general trend of the underlying assets to get huge profits, you still need to master enough knowledge to succeed. The best way to improve your chances of earning huge income is to be familiar with the changing trend of the price and scale of the specific assets you want to invest in. The advice given here is to study the changing trend of a specific asset in a few weeks and carefully study the main factors that affect the change of assets. Once you feel that you have learned from all angles, you can make the most insightful prediction-then try it!

Choose the right time

Timing is very important for options, because the price of the underlying assets at maturity determines the expenditure. Because option traders only want the price to fluctuate slightly on the basis of the exercise price, the best way to trade such options is to make the time closest to the expiration time. This is why most option traders choose one-hour expiration time. For the timing, the suggestion is to analyze various prices before trading, monitor the price changes of day, month and year with scale and price list, and pay attention to the changing trend.

Pairing: a strategy to reduce risk

One strategy to reduce the possible excessive losses in option trading is to pair the call option and the put option of a certain underlying asset. In this way, a "bird's nest" is formed, so that the market price at maturity is between the exercise price of two options, and you can also make money. Let's look at an example. Vodafone's current trading price is 146.729 per share. You decide to buy 200 call options at the spot price of 140.565 per share at the opening, with an in-price rate of return of 80% and an out-of-price rate of return of 10%. Basically, your position is very good. 200 call options are within the price. If there is no accident, you will get a return of 360 (200 investment, 160 income). But what if Vodafone's stock suddenly falls and the price per share is lower than 140.565? You will get 10% return on investment and lose 180. This is bound to be very disappointing.

Then the question is coming, how can we get a more favorable result? The suggestion to reduce the risk given here is to hedge the put option of the initial call option at the current price. This means that you will buy 200 put options at the spot price of 146.729 per share, with an in-price rate of return of 80% and an out-of-price rate of return of 10%. Now you have a good hedge position for the initial call option investment.

You can regard options as a basic investment tool if you like, but if you want to know more, these suggestions and ideas will come in handy sooner or later. Remember that blindness will never yield high returns.