Online stock option trading is one of the easiest ways to make money on the internet. Now there can be no question that online stock option trading can also be one of the easiest ways to lose money on the internet. Having said that, here are three ways a person can take advantage of options opportunities in the market.
1. Going long on plain vanilla calls and puts – these are the most basic form of derivative securities. Trading options allows individuals to custom tailor the amount of leverage used for each stock position taken. The smaller the put or call premium relative to the underlying security price, the higher the leverage. Higher leverage equals greater opportunity for profit with a limited amount of capital. It can also mean higher likelihood of losing your entire investment.
2. Writing (going short) on calls and puts – You do not have to have a master’s degree in finance to make money on the internet doing online stock option trading, but it doesn’t hurt. In the case of going short (writing options) you really have to have a good idea how you intend to use the money collected from the premiums sold. Taking this type of position takes a high degree of maintenance as losses can potentially be unlimited (not good).
3. Binary options – These are without question the simplest way to get involved in online stock option trading. Trades are made in fixed dollar amounts, without a spread, and without any put or call premium. Results are basically a thumbs up / thumbs down scenario. If a person owns a call and the price goes up, the trader makes money. If a person owns a call and the price falls, they lose money.
There are numerous ways to make money on the internet but I believe the best way for people with a background in finance to make money on the internet is by online stock option trading. A well trained individual with just a little capital can make extraordinary money using stock options and the right amount of leverage.