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Be a Money Spinner with Call Option Trading

May 26, 2008
You could be a money spinner with call option trading. Several traders in the market try to make a difference by adopting complex call option techniques. However, at times when you look around for complex solutions, the solution may actually be one that is absolutely simple.

Similarly sometimes it is the simple or the basic call option trading that is just right for the prevailing market trends. The below mentioned guidelines would be of great help to make a good profit with call option trading:

The secret to success with call option lies with understanding the pulse of the market. You should be able to correctly understand and predict the direction in which the market would move. Call option trading is actually playing with the direction of the market although your money meter would start ticking only if the market moves upwards. It is being able to predict the movement of the market and capitalizing on the upward movement.

There are many key indicators that can be used to predict an upward movement like for instance the market news, fundamental information like a rise in the dividend of a company, charts and graphs like reverse head and shoulder, upside price breakout to name a few. Some traders use a combination of indicators to understand the market trends. You must be able to predict or estimate the target where the price movement is headed.

The time factor is another important element. You should be able to estimate the time when the upward movement would take place and how long will it take to reach your target price. Deciding your call option expiry would depend on these factors. Your broker can be of great help in providing information regarding the options chains and other market news.

You must be clear about details like which stock exchange you want to deal at. Being able to decide the expiration date is very important. For this you should be able to estimate the time in which your price movement would take place and by when would your target price be achieved.

Study the market scientifically. Make proper comparisons of the Delta, Gamma, Theta and Vega for different target prices in the same expiry.

Keeping a track of the open interest and also the volumes in the market is very important. Choosing the best call option is another important factor. You must be able to rightly estimate the exit point and also the stop loss. Looking at the market dispassionately and scientifically is essential.

Close the position on time keeping track of the market trends. For making a good profit it is very important to monitor the market on a regular basis and understand call option trading perfectly before making any deal. You must not be carried away by the sudden ups and downs and make impulsive decisions.
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