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Today, we're showing you the best options trade to make right now. With markets moving up and down each day, this is a great time to be trading options. The more volatility means more chances at making money. But it also means there are more chances to get burned, especially if you're just jumping into a trade without doing your homework.
That's why we don't just want to show you our best trade – we want to help you become a better trader overall.
By now you likely know that trading options can increase your profit potential and lower your risk. By investing small amounts of money in options, rather than larger amounts in the underlying stock, your risk is automatically lower.
Since options prices can move many multiples of times faster than stocks do, you can rack up nice gains in a relatively short period of time.
But because you can use options to lower your risk doesn't mean they aren't risky. As fast as options can move higher, so, too, can they move lower. Many new traders have found that out the hard way.
Since there are a few more moving parts to an option than there are to a stock, you need a little training to be sure you get off on the right foot. That's why we are here!
We want to focus on two things that will make your options trading safer and more profitable.
First, you need to start with the right underlying stock. This is where most new options traders begin and end. They find a stock they think is going up or down, buy a call or a put, and call it a day.
No wonder they aren't making money.
Finding the right stock to trade options on is definitely important, but it's only the start.
Second, you need to set up your trade in a way that gives you the best chance of success.
Each stock comes with a smorgasbord of strike prices, expiration dates, premium costs, and a nearly limitless combination of all of the above.
A few simple strategies we like to use are to look for options expiring in about six months with strike prices just out of the money. That will help keep your costs lower than buying in-the-money options and gives your trade time to work with the expiration date being far enough away, but not so far that you have to pay more for the trade.
But one tool we want to focus on today is the limit order.
Beginning options traders are often so eager to get into a trade that they accept any price to do it, which means they enter a market order and often pay the highest price of the day. We can maximize our profits by using a limit order instead.
Now, we're going to combine our strategy with a stock we see moving higher over the next six months into our best options trade to make right now…