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In this article, we will be discussing the best methods you can use to trade options for a living. You can trade full time and you can even make a comfortable living by doing so. Firstly, you should know the proper way to treat the trade put and call option. Isn’t it? Don’t you think it is the better idea?
Have you ever thought of entering into the world of trading? Or you are already into it? If ‘Yes, then the technical analysis can be the key for building the living trading option. You can trade options for full-time for your comfortable living. Learn the proper way to trade options for a living with us! Finding the entry and exit strategies are the best way to make a good living with a stop option. When holding options contract overnight, buy near the close of the day.
Basics of Trade Options For a Living
Analyze the daily chart when purchasing an option contract and pay close attention to it. Analyzing them will help you to identify the area of entry and exit. If you are bullish then buy a call as you believe that stock will go up the next day. If you are bearish, buy a put as you believe the stock will go down on that following day.
For Example, X uses the 9 EMA, 20 EMA, 50 SMA, and 200 SMA on daily charts. If prices are rising above 9EMA and there is no moving average crossover, then X should consider the Bullish Sign.
Now, Let’s look at the Relative Strength Index and Moving Average Convergence Divergence. Relative Strength Index shows whether the stock has been overbought and oversold. Moving Average Convergence Divergence shows the trend of the stock. You can draw trendlines too. Drawing the trend lines will help to find patterns along with horizontal resistance and support levels.
You’ve to look at all the indicators or you can make a combination of them to understand which way you believe the stock can move. You should be sure that giving yourself enough time to analyse these areas of entry and exits, will be part of your trade options for a living strategy.
In the beginning, you might fall or find yourself to be in a sticky position but when you keep practising, you can analyse these areas very frequently.
Pro Tip: Buying options is easy but when all options expire worthless then what? That’s why selling options is said to be a great trading strategy. But for selling options, you have to learn all the basics of options.
- If you want to learn how to sell options for living? Check our Option Strategies: A Mentorship Program
How much money one should need to trade options for a Living?
Thinking about the money you should need to trade options for your living? Don’t worry we are here to guide you to the best of our knowledge.
- If you’re looking to make unlimited day trades then you need at least ₹500000.
- A short term swing trader will require at least ₹200000
- ₹50000 is good for small accounts to buy options. But buying will make it a bit difficult for creating a good living from options.
Well! Having great money is possible but if you are not aware of risk management then it won’t work.
So if want to Trade Options for Living then learn how to manage your risk. Make your risk management rules and follow them with proper discipline and patience. One of the best methods you can use is: Don’t just buy or sell a naked option, start trading with spreads.
- I have written an article about spreads: Best Guide to Learn Option Spread Strategies for [FREE]
One more thing you have to consider is how long you are planning to hold the option. You can day trade the stock option or hold it up to the swing trade, that totally depends on your trading setup. And Of course, you do have a knowledge of swing trade. If you are buying the option in the morning and making a profit at the same time, the best option of course, if resistance is encountered or the desired profit can be easily achieved.
How much capital do you have?
This is the single most important factor whether you can do this for the full time or a hobby and side hustle. Well! If you have never thought of that then now this is the high time to give it a thought. It always takes money to make money, it absolutely relates with the trade options for living. You actually need initial capital, to begin with, and that should be the capital that you can afford to lose.
- Must read this also: What is Intraday Trading? The best guide for beginners
Owning stocks is the best option to maintain capital?
The reason you want to own stocks for the long term is that how to build consistency with long-term wealth. If you are living with those much-needed options, then by definition, the money is not needed for your net worth since you are spending some or all of it on your living expenses. Stocks also provide financial stability. You are not likely to risk your long-term stock holdings by converting them to cash-to-buy options so they provide a kind of baseline, or foundation, to the portfolio.
You can actually leverage your long-term buy-and-hold (LTBH) stocks but it is not as you think. You can actually leverage your LTBH investments with your buying power (BP) in a margin account. Buying power is how much can you spend on any given day on trading-related activities in your account. It’s the sum of your cash balance plus your available margin which is how much you can borrow for trading purposes.
It is a bad and risky decision to take out and use a margin loan, but buying the power is the powerful tool in your options trader’s arsenal. Keep in mind you must be careful to manage the things, BP as a part of risk management strategy.
So, do your research and due diligence and then purchase the stocks in quality companies that you will be willing to hold for years, if not decades. Use them as your growth foundation and leverage their equity to support your trading options.
Few Key points about trade options for a living
- You cannot earn a lot if you are ready with the capital.
- The larger your capital the more difficult it is to hit your earning target since you have to have more or larger positions active at the same time. It is challenging to scale up so you should expect diminishing returns as your account grow.
- 0.5% per week does not seem like much, but it works out to about 25% per year in simple terms. Most hedge fund managers and professional traders would be happy with a 25% return annually which is a bit difficult to achieve. Could you expect higher returns? Yes! But they could be lower too. So planning conservatively.
- The flips side to the previous point is that it is likely somewhat easier for an individual retail trader for making higher returns than is an institutional trader who is working with larger sums, more demands i.e. performance based on different performance, and with tighter restrictions for the risk management.
I hope now you have understood the concept of trade options for a living. If you any query related to trade options for a living can type in the comment box.
Some useful Articles:
- Unlocking the Secrets to the Most Successful Options Strategy
- How to Use Options to Speculate on the Market?
- Mastering the PCR Ratio: Unlocking the Power of Option Trading
- How Effective Trade Management Can Boost Your Options Trading Strategy
- Using Technical Analysis to Identify Profitable Option Trades
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Options Strategies – A Mentorship Program
On the 1st of September, We have launched a new mentorship program for Option strategies, in which we’ll discuss how can we deploy these strategies? What rules we should follow before taking a trade? and what should be our adjustments if the script is moving against your direction?
DISCLAIMER: – we are not a SEBI research analyst. Views posted here only for educational purposes. There is no liability whatsoever for any loss arising from the use of this product or its contents. This product is not a recommendation to buy or sell, but rather a guideline to interpreting specified analysis methods. This information should only be used by investors and traders who are aware of the risk inherent in securities trading.