There are a lot of ways to trade options and there are also many different “things” that you can trade options on.

Ok, that sounds confusing even to me and I am the one that just wrote it, so let me try to break it down a bit.

First, there are a lot of ways to trade options, what does that mean exactly.

Keeping with the theme of my site, “options trading strategies” what I mean is that there are many different options trading strategies available to you.

Each strategy has its own risk reward profile, some with high risk high reward (buying calls and buying puts), medium risk medium reward (debit spread and credit spread), low risk low reward and basically any other combination you can think of.

There are trading strategies available to you whether you are market neutral, bullish or bearish.

There are complex options trading strategies that can involve buying and selling up to four different types of options contracts, and there are also simple trading strategies that involve buying OR selling only one contract.

Now the next part of my statement there are also many different “things” that you can trade options on. What does this mean?

What this means is that you can buy and sell options on almost anything. For example:

You can buy and sell options on stocks.

You can buy and sell options on futures.

You can buy and sell options on houses.

And there are a few more!!

Obviously there is a lot to get into, but today I want to talk about some simple options trading strategies that you could use today to “get your feet wet” so to speak.

In my mind a simple strategy would be a basic strategy involving just one type of contract (Put or Call) and one type of (Buy or Sell) transaction.

Before I get into this I want to put a disclaimer that simple does not go hand in hand with low risk.

By this I mean, just because a strategy is simple does not mean that this strategy also has a low level of risk. In fact simpler trading strategies might have a higher level of risk than their more advanced “cousins”.

Simple Strategy #1 – The Covered Call

This is most likely the very first strategy you will hear about as you get started in options trading.

As the term implies you are basically using “Call” options to “cover” stocks you may already own.

Hmmmmm, ok maybe the term does not exactly imply that, but this is what it means. Keep in mind that all options trades will either be Covered or Naked.

Covered means that the options trade is protected, covered, or offset by a position in the underlying security.

when selling covered call you will sell Call options against stock you already own. If you do not own the stock and you sell a call option then this is a naked position. Hope this is making sense.

I actually cover the covered call strategy in a bit more detail in another area on this site.

Note: Selling “naked” calls is one of the most risky positions you can ever do and I definitely do not recommend this type of strategy, especially for beginners.

Simple strategy #2 – Selling puts for income

This strategy is a way to get paid to “possibly” own a stock and to make money in the stock market without ever owning any shares.

The way this strategy works is you sell put options on stocks you would not mind owning OR you sell put options at a strike price that you think a stock will never drop to.

For more details, read into my article on selling put options.

When I first got started with options trading I started with the covered call strategy as a way to recoup some of my losses from stock trading.

As I experienced a lot of success with this strategy I moved to selling put options.

Because I did not offset the put options with any stocks, the trades were naked.

If you are just getting started in options and you own already own stocks, you should look at the covered call options strategy.

If you are just getting started in options and you do not own any stocks, I really recommend the naked put strategy of selling puts for income.

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