Options trading is different from your normal day-to-day stock buying and selling trades. Options trading app requires better & in-depth knowledge about the assets you are investing in. Building a proper Option trading strategy is key to Profit generation.
Recently, Options Algo trading has been among the High-performing techniques. It has been a really consistent performer globally & helped traders achieve better returns on investments (ROI). Below is 4 Step Process for you to Get started with Options trading:
Choose Platform For Options Trading
Choosing the best platform is what’s needed first, so you can gain maximum benefits from the latest trading technologies & developments. A feature-loaded, easy-to-use trading app will give you that small edge or support in your trading.
For example, the Bot marketplace has been among the red-hot tools for top-performing traders around the world. Bot marketplace consists of trading bots. Trading bots makes options trading much simpler & cuts short a lot of laborious work. So you can focus more on other aspects of trading. Alongside, trading bots execute trading tasks much faster than we do by ourselves & also boost overall efficiency.
So pick the best possible trading platform & make your trading experience as more efficient as possible. An Algo trading app with an options trading facility will be a 100% perfect trading companion. Algo trading (i.e. algorithmic trading) will help you achieve much better returns than traditional trading apps.
Figure out Your Investment Basket
This is Another crucial element of options trading strategy. Depending upon how new or experienced you are in Trading in general & How much amount of money you can afford to stay invested for a decent amount of time.
Since you most probably are not much experienced with Options, start with a relatively smaller amount & Increase gradually. So you can slowly get accustomed to Options. Also, options trading is basically Option contracts. These contracts involve time periods & expiry dates.
For any options contract you are holding, they are bounded by a time period. They would be valid for 30 days, 45 days, etc. Imagine the price movement of your option is going as per your expectation for 15 days, but then you have to pull out just because you need that invested money for some reason. So in order to avoid such situations – Plan up your investment amount properly.
Build your Options Trading Strategy
The trading strategy involves a lot of things – How much diversification do you want to keep your investments? Each asset you are holding in an options contract would be different. Expected returns and the time period for return could be significantly different as well.
For example – You buy a Reliance option at INR 2000. After your research, you are expecting the price to reach 2500 in 30 days. Which is also the option contract expiry period. So you would want the Reliance option price to hit 2500 within that period to make some profits.
Having a strategy in place also means you should be prepared for what if the price goes into a downward spiral. How much you can afford to let Option’s market price go below INR 2000? So even if that happens, you only lose a small portion & can be in a better position to enter your next options contract.
Must thing to do: Backtest your Strategy
Backtesting means a mock trial of implementing your strategy & seeing how it performs. So you can make improvements & corrections wherever needed in the strategy to avoid Losses and also increase your Profits. The backtesting option trading strategy has so many benefits.
In a study conducted recently, backtesting increased average ROI by 20%+ & also saved losses of more than 35%. So always backtest your strategy before final implementation in order to achieve far better results. Helps avoid losses, and increases profits – there is everything to love about Backtesting.
How to backtest you may ask? Download and Use Algo trading app. The backtesting abilities of these algo trading Apps are so powerful. Alongside backtesting, you also get Modern age tech trading features such as Bot marketplace, options Algo trading, and a lot more.
Options trading is somewhat different from normal Stocks trading, buying, and selling. It also has so much more To provide better returns on a relatively low amount of investment. You don’t have to pay the full price in order to Trade the options of any company.
The trader just has to pay the premium amount & you become the owner of that option. The best practice to do options trading would be to do trading on an Algo trading app. Options Algo trading is the real game changer – Today as well as in the Long term future of options trading.
Most importantly, Build a trading strategy around your investment amount. Thoroughly backtest it, improvise the strategy after backtesting & use it in the real-time market. That shall make you bound to achieve a Really good Return on Investment.