REGULAR BREAD AND BUTTER STRATEGY
If you are looking for a regular bread and butter strategy for trading the markets then one method that has worked for me is ‘selling naked puts’ on major indices.This method works particularly well on the major indices like the FTSE or the Dow Jones for example. You need to be following the markets and looking for a series of consecutive selling days.This will then push up the price of put options and you need to be looking at put option premiums that are approximately 10% out of the money, with with an expiration date 4 weeks away on average market conditions but all depends on market volatility. If there is some major news event like a terrorist attack or something unusual then this would need to be taken into account before making a decision.
Before placing a trade, use technical analysis to pinpoint your entry and for best possible price, then once you are ready you will need to sell to open the put option.Once you have opened your trade it’s a case of just sitting and waiting for the days to tick down and hopefully your option should expire worthless, enabling you to pick up the premium.
If the market moves against you have two possible decisions. You can either hedge your position in the future’s market or you can close out your position and take a loss or break-even depending again on market volatility.If you choose to Hedge your position you can partially hedge or fully hedge and you can even choose different types of instruments like a daily options.This type of strategy can bring in a regular 10% to 30% income each month.
I must stress at this point that selling options whether they are calls or puts comes with significant risk and I recommend that you fully research options and how they work before getting involved. Selling call options in theory means that your loss can be unlimited. There are many different way to use options but this is a tried and tested method. The actual mechanics of options and how they work are quite complicated.
If options aren’t your thing, you want something a bit more exciting and want to learn a tried and tested simple method for trading any market using cfds then check out