Selling options is one of the best binary options strategies traders use to profit from trading.
The Best Binary Options Strategy For Selling Call Options
The primary concept behind this strategy is the expectation that the options sold would expire without any value, allowing the trader to gain profits from the premiums paid.
The two essential factors impacting the sale of options include:
· The inherent volatility
· Covered vs. Uncovered options
The inherent volatility
Just like buying or selling stocks, the volatility of the underlying is important when it comes to selling options. The premiums increase when the volatility of the underlying asset is high. At the same time, when the inherent volatility is low, the premiums depreciate. To make a profit, you would want to sell options when the volatility is high and the premiums have appreciated too.
Covered vs. Uncovered
The use of the terms covered and uncovered refers to your position with regard to the underlying asset. Whether or not you are covered will significantly affect your chances of losing or wining on the trading strategy that you choose.
Common strategies for selling call options:
Selling covered calls
A covered call occurs when a trader has a corresponding long position in the underlying asset. This is arguably one of the most popular selling strategies. You will likely want to implement an in the money call strategy if you are slightly bearish about the underlying assets. More appropriate would be to sell an out of the money call strategy if you encounter bullish sentiments on the underlying asset.
Selling uncovered calls
Uncovered options are also known as naked calls. Traders who are highly bearish on the underlying assets will typically want to pursue an uncovered call strategy. This strategy is laden with risk. If you are a beginner, you will probably not be able to sell uncovered calls mainly because of the inherent risks involved in pursuing such a strategy.
Selling a mix of covered and uncovered calls
Selling both covered and uncovered calls is also known as the ratio call strategy. It is appropriate to apply this strategy when the sentiments on the underlying asset are neither bearish nor bullish.
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