Best stocks for option trading 2015


We will not cover the basics of call-writing strategies, but here are five strategies to consider if following this approach. This is perhaps the key thing to remember. Many option writers see high premiums on certain volatile stocks usually in the technology or biotech sectors , and buy companies they are not familiar with and then sell options on them. They then find the volatility of the stocks a little too much to take.

Remember that call writing is an income-generating strategy, not a strategy to add even more stress to your investment life. Stick with companies that you would be happy to own anyway. Keep the basics in mind, and do not reach for returns by buying smaller, more speculative positions. Since call writing is designed to boost your income, selling options on companies that pay dividends can potentially boost it even more.

If you are selling options on a regular basis, every three months, those positions that have not been called away will pay you a dividend. It is a nice little bonus in an income-enhancing plan. For example, Apple Inc. Another key to an options strategy is to limit your downside risk, and what better way to do that than to use companies that have no debt and lots of excess cash? Still, slightly above the money call options can return about 4. The cash should provide a cushion in a down market, allowing you to continue selling calls if your position is not called away.

Every day that the option holder waits, the time value associated with the option diminishes. Many times, when a stock makes only a modest move, option buyers can be correct about timing and direction and still lose money on their investment. New options traders tend to make dangerous mistakes. In addition, Graves says many traders opt to buy short-term options because they are cheaper, but these traders often underestimate how long it will take their long-term thesis to come to fruition.

Simon Curio, founder of SimonSaysOptions. JJ Kinahan, managing director of client advocacy and market structure for TD Ameritrade, says the 75 percent statistic actually works in favor of option sellers. Market gamblers looking to get rich buying options will largely be disappointed with the results. However, Curio says smart investors should flip the tables on these gamblers. This can be a very good strategy, particularly in volatile, sideways markets like the one we are currently experiencing.

Selling options against existing positions boosts your overall return, and provides a bit of protection but not much in a declining market.

We will not cover the basics of call-writing strategies, but here are five strategies to consider if following this approach. This is perhaps the key thing to remember. Many option writers see high premiums on certain volatile stocks usually in the technology or biotech sectors , and buy companies they are not familiar with and then sell options on them. They then find the volatility of the stocks a little too much to take. Remember that call writing is an income-generating strategy, not a strategy to add even more stress to your investment life.

Stick with companies that you would be happy to own anyway. Keep the basics in mind, and do not reach for returns by buying smaller, more speculative positions. Since call writing is designed to boost your income, selling options on companies that pay dividends can potentially boost it even more. If you are selling options on a regular basis, every three months, those positions that have not been called away will pay you a dividend. It is a nice little bonus in an income-enhancing plan.

For example, Apple Inc. Another key to an options strategy is to limit your downside risk, and what better way to do that than to use companies that have no debt and lots of excess cash?