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In this option trading strategy, the trader buys a call — referred to as “going long” a call — and expects the stock price to exceed the strike price by expiration.
A standard options contract is for 100 shares of stock. There are also two types of positions: Long: You own the security in question because you think it will increase in value.
While investors may need to answer a few other questions, the list is much less detailed than for traders. 3. Set up your brokerage account. Choosing a broker will depend on your trading approach.
Screen for stocks at one of the best brokers for options trading and look for stocks with average to above-average price gains over time, something above 10 percent. 4. Sell put options to play ...
For example, a bull spread constructed from calls (e.g., long a 50 call, short a 60 call) combined with a bear spread constructed from puts (e.g., long a 60 put, short a 50 put) has a constant payoff of the difference in exercise prices (e.g. 10) assuming that the underlying stock does not go ex-dividend before the expiration of the options.
The trader may also forecast how high the stock price may go and the time frame in which the rally may occur in order to select the optimum trading strategy for buying a bullish option. The most bullish of options trading strategies, used by most options traders, is simply buying a call option. The market is always moving.
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