Options trading is a popular form of investing in Hong Kong and elsewhere. Options allow traders to diversify their portfolios and take advantage of market movements. Over the years, professional traders have developed multiple options trading strategies to reduce risk and maximise their chances of doing well. This article looks at nine recommended options trading strategies that professional traders use in Hong Kong. To learn more about options trading, you can check out Saxo Hong Kong to learn more.
Covered call writing
The first option strategy recommended by professional traders is called Covered Call Writing, which involves writing a call option on an asset the trader already owns, such as stocks or ETFs (Exchange Traded Funds). By selling a call option against their existing asset, the trader can generate additional income from this position while also benefiting from any capital gains on the underlying asset.
Put-selling
The next option strategy recommended by professional traders is Put-Selling. This trading strategy involves selling a put option on an asset the trader believes will remain unchanged or increase in value over time. By doing so, the trader can collect premium income from this position and benefit from any capital gains if it appreciates. The critical risk of this strategy is that the underlying asset may decline in value and result in a loss for the trader.
Protective put strategy
The Protective Put Strategy is another popular options trading strategy employed by professional traders. This strategy entails buying a put option to protect against losses on an existing long position, such as stocks or ETFs. The trader can limit losses if the asset declines by purchasing a put option with a price below the current market price.
Bull call spread
Another option strategy recommended by professional traders is a Bull Call Spread. This strategy involves buying a call option in Hong Kong with a lower strike price and selling one with a higher strike price at the same expiration date. The trader can benefit from any increase in the underlying asset’s value without taking on too much risk. The potential loss for this strategy is limited to the difference between the two prices minus any premium collected from writing the higher-strike call option.
Bear put spread
The Bear Put Spread is another popular option trading strategy among professionals in Hong Kong. This approach involves buying a put option in Hong Kong with a higher strike price and selling one with a lower strike price at the exact date of expiration. This strategy enables traders to benefit from any decrease in the underlying asset’s value without taking too much risk. The potential loss for this strategy is limited to the difference between the two prices minus any premium collected from writing the lower-strike put option.
Long strangle
The Long Strangle is a popular options trading strategy that Hong Kong traders use in volatile markets. It involves buying a call option and a put option with different but relatively close strike prices at the same expiration date. This strategy can be beneficial if there is a sharp move in either direction, as it allows the trader to capitalise on either side of the market.
Short strangle
The Short Strangle is another popular option trading strategy used among professional traders. This trading strategy involves selling a call and put option with different but relatively close strike prices at the same expiration date. By doing so, the trader can collect significant premium income from the position and benefit if the underlying asset remains unchanged or moves very slightly in either direction.
Iron condor
An Iron Condor is an advanced options trading strategy recommended by professional traders in Hong Kong. It entails simultaneously buying a call option with a lower price, selling a call option with a higher price, buying a put option in Hong Kong with a lower price, and selling a put option with a higher price at the same expiration date.
Long calendar spread
The Long Calendar Spread is another advanced options trading strategy recommended by professional traders in Hong Kong. It involves buying an option close to expiration and selling one with a further out expiry date but at the same strike price.
Conclusion
Professional traders in Hong Kong recommend various options trading strategies to investors. Traders need to understand the risks associated with each strategy before implementing them. Doing so can help them make informed decisions about strategies best suited for their investment goals and risk tolerance levels.
