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There are countless ways to make money with options, but profiting from options doesn't have to be complicated. In fact, it is possible to make top-dollar returns with fairly low risk using strategies like the put option spread.
And you won't need an army of Wall Street mathematicians to do it either.
The secret is really not a secret. You can start small, and if you consistently follow your plan, you can slowly build the nest egg you've always dreamed about by using options.
Money Morning Chief Investment Strategist Keith Fitz-Gerald lays it all out in just a few simple steps:
- Trade regularly. No, that doesn't mean trade all day. Rather, it means set aside a routine time to do your homework and then execute your plan.
- Limit your risk. This is the holy grail that professionals seek and many individuals need to master. Know how much you could lose before you hit the trade button.
- Keep at it. Nobody is a master trader when they first start out. Don't quit when a trade doesn't work out. If you follow a solid plan, then the next one will work.
- Understand the market's general bias. Over time, the stock market wants to move higher. There may be rough times, but the stock market has consistently moved higher for more than a century.
- Remember that options trading is just a piece of your investment puzzle. It's not all or nothing.
And to help you get started with options trading, we're going to add an important tool to your toolbox.
It's a great way to limit your risk without sacrificing upside. The best part is it's easy to execute…
Our Best Options Trading Strategy
If you're bullish on a stock, the easiest options trade is simply buying a call option. But buying a call option comes with some risk.
If you're right and the stock price moves higher, you can make a lot of money. But if you're wrong about the stock, your option could lose all of its value. That's a huge variability of returns and not really suitable for everyone.
What if you could protect yourself from the downside while still having the potential to make money on the upside? Too good to be true?
Well, there is no free lunch, as they say, but you can trade the downside risk for a little less upside potential. That is a whole bunch more attractive to most investors.
Here's how to do it with a bull put spread…