Swing Trading Options Strategy
The swing trading options strategy is an uncomplicated approach that will produce quick and safe profits. This is the best swing options guide that our team at Trading Strategy Trader has used for years to chase the market for significant returns. Here’s how to recognize the right swings to increase your profits.
If you are new to Options trading, we recommend you start by reading our very profitable options trading tutorial that will help you understand how to trade stock options: How to Trade Stock Options for Beginners – Best Options Trading Strategies.
The swing trading options strategy has three main benefits:
- Potential to experience significant returns on your initial investment.
- Best swing trading Options can limit your risk exposure.
- You can sell high priced stocks with a very small account.
If you are trading with a small trading account, then Options for trading is a good strategy to leverage your initial investment. You don’t necessarily need a lot of capital to trade with the best swing trading options because you can trade “expensive” stocks like Amazon, Netflix or Alphabet without having to spend a lot of money.
Swing trading options strategies tend to stick mostly with underlying Call and Put Options .
Basically, if you want to buy a stock, you buy a Call Option. On the other hand, if you want an easier way to sell stocks, the best way is to buy Put Options. Also, read weekly trading strategies that will keep you sane.
Why Opt for Swing Trading?
The simple reason why we have chosen Options for swing trading as the main strategy to benefit from stock market trading is because of the huge profit potential.
Everyone likes to make big profits and swing trading options strategy is a safe and secure investment vehicle to achieve your financial goals.
Let’s get a little deeper and outline some of the more prominent principles behind Options for swing trading.
Swing Trading Options Strategy – Buy Call Options
The swing trading options strategy is a six step by step strategy that can be applied in ANY market. What you will learn is just the best swing trading options.
You can see this as a set of principles that can help you understand Options Trading and how to apply a swing trading options Strategy.
Also, be sure to read the Simple Trading Trading Strategy here.
Step #1: Choose the Right Stock
This is your first step when looking at Options for swing trading.
Picking your stock can be a daunting task as there are many stocks listed on the New York Stock Exchange and available for trading. Naturally, what you want to do is build a solid sector watchlist with key stocks.
Wait for outliers and large percentage moves in your stock watch list and use those stocks to execute the Options swing trading strategy.
Even better, if a larger percentage move is due to some earnings report and has a strong catalyst behind it because it means the share price is driven by strong fundamental reasons.
Step #2: Assess the Market Environment, if you want to Buy Call Options look for a Bullish Trend
You need to know what type of market you are in to successfully trade the best swing trading options.
Once you understand what type of market you are in that will guide you on what side of the trade you want, long or short.
The easiest method to determine an uptrend is to look for a series of highs and higher levels.
In addition, determining the overall market trend you also need to assess the characteristics of your market environment: low volatility versus high volatility. This will help you then choose your preferred expiration date for swing trading. Also, learn about the difference between options vs. RSUs.
Step #3: Choose your Strike Price
The next step that a swing trading trading strategy should give you is the strike price.
Choosing a strike price can be a difficult task if you don’t know what to look for. Ideally, what you want to do is pick an at-the-money option but one that isn’t too far out of the money and into the money.
What are out of the money options?
According to Investopedia: ” Out of the money (OTM) is a term used to describe a call option with a strike price higher than the market price of the underlying asset, or a put option with a strike price lower than the market price of the underlying asset. “
Step #4: Choose Your Expiration – Monthly Option
An optimal swing trading option strategy needs to give your stock enough time to get to your strike price in order to pay you on the call option, otherwise your option may expire.
As a general rule, if your expiration time is too large, on one hand, the risk decreases, but at the same time, the percentage profit decreases as well.
In other words, if you buy more time you will get less risk and your potential loss will be smaller.
The best swing option approach is to use monthly options when you get a higher percentage profit.
Step #5: Optimizing Entry and Exit – Buy on Pullbacks
The most important part of the best swing trading options is optimizing your entries and exits.
As a general rule, you need to be aware that Options trading takes time and you need to be patient.
Also, with the best swing Trading options, you can afford not to have the best entry types on some of your swing trades because as long as you are patient, you will get cheaper prices.
If you buy a call option, one trading tactic you can use to optimize your entry is to buy a coop.
You can use our trading tactics on how to trade backbacks here: How to Profit from Trade Backbacks.
Also, always define a maximum stop loss after you buy an Option and align your take profit with where you think the market will be before your option expires.
Step #6: Manage the trade
During periods of low volatility, you want to reduce your position when doing Options for swing trading.
If you still believe in your trade, and you think you need more time, simply roll your Option to the next month. This is a smart money trade so they don’t lose due to time decay.
* Note: Time decay is simply a ratio that measures the change in option price relative to the decline in time to expiration.
The most profitable option strategy should be suitable for executing Put and Call options.
* Note: Above is an example of a buy call option using the options trading tutorial. Use the same rules – but in reverse – to buy options trades.
In the picture below, you can see an example of a real buy option using the best swing trading options.
The swing trading option strategy is a powerful option for trading, however, like any other strategy, it requires knowledge of how to use it properly. We hope that our swing trading options will help you generate steady profits.
There are many opportunities to make money with Options for swing trading because they can be very profitable, and a much safer way of trading than just trading stocks. You can also take our Trader Profile Quiz.
Daily fluctuations in the stock market tend to shake a lot of people out of their trades, and the best swing trading options tend to smooth out the price action a bit so they tend to reflect a bit more stable trading opportunities. Also, read Best Binary Options Strategies.