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What You Need to Know About Call Option Swing Trading

Nov 19 2015

Call Option Swing Trading

If you ever wonder about the fastest way to make yourself very rich, then buying and selling options seem like the most reasonable choice. However they are also a quick way to lose a large amount of money as well. For the first reason, many people are interested in making profits this way. On the other hand, many people are also too scared to try. In spite of the hair-raising stories you might have heard about this issue, there is no reason for you to be fearful. Swing trading options is a simple strategy that will lead you to a more reliable, protected and steady income gain. Thanks to the short time frame, where the execution of swing trades is 2 to 10 days, swings are essential for having successful option trades.

Every option trader is able to find online a number of different trading strategies. Thus, it is very important that we have a better understanding about option trading before making a choice. More interestingly, option trading can be a clear path to huge profit potential. Compared to other instruments of investment you might choose from, option swing trading stands out as a more profitable choice. Call option swing trading comes in a number of different types. Most of the time, swing trading strategies based on options includes buying puts at reversal points when the uptrend has occurred and buying calls at reversal points when downtrends take place. The basic strategy of swing trading has four variations you can use.

The first variation is the long and short calls. In this option, we only use calls for swing trading. The short call is used to produce immediate income while the long calls cost you some money. You need to keep in mind that the long call should be bought when the downtrend is about to end and make sure that you sell it when the price is going up. The second variation is long and short puts. In this trading strategy, you can use calls for swing trading only. Since it is a strategy based on calls, the short put helps you make more profits and the long put will cost you some money. The short put comes with a higher risk compared to the long put. Call option swing trading can be based on short calls and short puts. With the short puts at the bottom and the short calls at the top, when you have 100 shares for every short call, your risk on the short call shall be reduced. The last variation is opening more options of every side of the swing. When you believe that a strong price movement is much bigger on a certain side, it is important that you come up with a different approach that opens more positions available.

Call option swing trading has made this strategy more interesting. Not only does it combine reduced market risk and high leverage, it also keeps you away from short stock. More interestingly, it also leads you to plenty of variations in this strategy.

Using Volatility in Options Trading and ETF Swing Trading

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