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A Brief Guide to Options to Swing Trade

by Steve Patterson on Wednesday, May 19, 2010 6:00 AM

A Brief Guide to Options to Swing Trade

Option swing trading is advantageous as it enables you to maximize potential rewards while minimizing potential risks. Those involved in option swing trading are able to leverage their investments by purchasing and selling in a variety of combinations. Options are termed wasting assets: time significantly impacts option prices and trade profitability. The value of the options falls as their expiration date nears. Investors must therefore liquidate their positions prior to option expiration if they realized their profits. Unprofitable options expire on the final trading day of that particular option.

Options to swing trade include call options and put options. Calls constitute the basic strategy adopted by the majority of traders. If, through their research, option traders come to the conclusion that a stock will take off in price, they can purchase call options that are priced in contracts.  When a contract of a call option is bought by an investor, the investor will anticipate that the stock’s value will rise above the price that it is currently at within a specified targeted date. If this is correct, a profit may be made. However, if there is a decline in price, the option value will also fall.

Puts options on the other hand, are bought when an investor decides that the underlying stock is going to decrease in value. When this occurs, the value of puts increases and the swing trader is able to lock in the profit through the selling of their puts. Over a full day’s trading, this process may be repeated several times over. Furthermore, when the stock price increases again, active swing traders may purchase the puts again.

There are many swing trade options to learn about yet if you are starting out in swing trading, call options and put options are the strategies that you are advised to master first.

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22 comment(s) so far...

Anonymous 5/20/2010

Pretty useful info on Swing Trade. Thanks for sharing. <br />Can you pls name a best magazine on the topic? Actually I would like to buy for info.<br /><br />Have a nice day<br />Helen

 
Anonymous 5/26/2010

Useful and informative read, many thanks for sharing with us. There is no doubt that option swing trading is profitable and this post will help you if you want to go in this trading.

 
Anonymous 6/3/2010

Swing Trading is not high-speed day trading. Some people call it momentum investing, because you only hold positions that are making major moves.

 
Anonymous 6/9/2010

Swing Trading offers the potential profits without the pressure and need to be glued to your computer all day long.

 
Anonymous 6/12/2010

Swing traders use technical analysis to look for stocks with ... Therefore, swing trading is mainly used by at-home and day traders.

 
Anonymous 6/17/2010

Nice post thanks for sharing, no doubt that swing trade is emerging as a profitable business in current era.

 
Anonymous 7/1/2010

Very helpful and informative post thanks for sharing no doubt that swing trade is growing as a very profitable business hope to see some more valuable information from you.....<br />

 
Anonymous 7/6/2010

Swing trading is style of trading that attempts to capture gains in a stock within one to ten days.

 
Anonymous 7/10/2010

Swing trading isn't an exact science or a system. It's a way to get an edge so you can profit from trades.

 
Anonymous 7/21/2010

The objective of swing trading is to get short term benefits from the long term trend of the stocks.

 
Anonymous 8/5/2010

The commodity or even the commodity with the investor is traded around the basis of emotions that are both optimistic and pessimistic.

 
Anonymous 8/8/2010

no doubt that swing trade is emerging as a profitable business in current era.

 
Anonymous 8/10/2010

What are the causes of market risks? explain how it can be minimized.?thanks.

 
Anonymous 8/16/2010

There is no doubt that option swing trading is profitable and this post will help you if you want to go in this trading.

 
Anonymous 8/26/2010

I am planning on investing joining a website like e trade or share-builder.Whats the benefits of joining the stock market trading? besides financially. can it help build your credit.

 

Trading stocks will not improve your credit rating unless you are able to withdrawal funds from your trading account to pay off debt.

 
Anonymous 9/13/2010

Thanks for sharing no doubt that swing trade is growing as a very profitable business hope to see some more valuable information from you.....

 
Anonymous 12/20/2010

I've been trying to learn more on swing trading since coming across it briefly in a finance module i took at uni. Have found it quite difficult to get my head around to be honest but this has put things across a lot more simply - thanks for the info.

 
Anonymous 1/7/2011

Thanks for making sense of swing trade, seems pretty important in the stock market.

 
Anonymous 2/16/2011

profitable and this post will help you if you want to go in this trading.

 
Anonymous 4/5/2011

Swing trade is deffo growing trade, agree totally.

 
Anonymous 2/2/2012

Thanks for info about Swing Trade.....<br /><br />It is very useful for me......

   
  
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