Before you can select a CFD option proficiently, you need to advise and choose a trading strategy that must primarily be constructed on how you want CFD options to function for you. This is because you will discover that a CFD option trading strategy will only produce success for you if you can utilize it in a way to achieve your investment objectives. For example, you could exploit the flexibility of options in order to support your planned speculation portfolio in numerous ways.
Consequently, you will find that it is worth devoting your time in detailing your financial plan and listing its major intentions. By doing so, you will filter the number of strategies that may be ideal to you because only a few will then be really able to satisfy and achieve your objectives. The following CFD options strategies will now be explained with this intent in mind. They should help you improve your trading results under a number of different market conditions:
You will require such a strategy if you determine that the price of the underlying asset of your CFD option is rising in value. You should then activate a ‘call’ CFD option under these circumstances.
For example, your technical analysis indicates that oil is very likely to increase from its current value of $110 over the short term. You are also aware that you will be entitled to an 87% profit if you open a ‘call’ CFD option with 10-Capital using oil as its underlying asset. In addition, you also precisely know your risk exposure because if you finish out-of-the-money, you will receive a refund between 10% and 15%.
You next choose to deposit an investment of $1000 and opt for an expiry time of 30 minutes. That is it? These are all the decisions that you have to make. Now, when your expiry time expires and if the price of oil is just $1 higher than your opening or strike value, you will earn a profit of $780 in just 30 minutes.
This is a fantastic return for what appears to be a small risk exposure and with minimum effort. However, like any investment decisions you must ensure that you fully understand your objectives and risks before activating any new trades. In this respect, your goals and risks are well-defined as compared to other investment types. In summary, despite all benefits of trading using CFD options, you should always work and adhere to a well-developed trading strategy.
You will require such a strategy if you determine that the price of the underlying asset of your CFD option is falling in value. You should now activate a ‘put’ CFD option under these circumstances.
For example, your technical analysis indicates that the EUR/USD currency pair is very likely to decrease from its current value of 1.4000 during the next few hours. You are aware that you will be entitled to an 87% profit if you open a ‘put’ CFD option with 10-Capital using the EUR/USD as its underlying asset. You also know precisely what your risk exposure is because if you finish out-of-the- money at expiry time then you will receive a refund between 10% and 15% of your initial deposit.
You next choose to invest a deposit of $2000 and opt for an expiry time of 1 hour. Now, when your expiry time expires and if the price of EUR/USD is just 0.0001 below your opening or strike value, you will earn a profit of $1560 in just 1 hour.
After you have mastered the basics of CFD options trading and are proficient at operating simple strategies such as the bull and bear ones just defined, you could consider learning how to use more sophisticated strategies such as the following one.
HOW TO TRADE:
You will discover that our trading platform is a very simple way to speculate on the financial markets compared to other forms of investments. Consequently, you will have improved possibilities of making worthwhile and consistent profits by trading them. In particular, if you become a member of 10-Capital then you will have the opportunity to gain as much as 87% profit per trade within an hour, even if you are a total novice.
You can increase your profit potential even more and minimize your risk exposure at the same time if you invest your time to study and master CFD option trading strategies. This article
introduces and discusses some of the more popular strategies which you’ll find great use for whether you are a novice or experienced CFD options trader.
Also known as hedging and double position, this is a clever strategy which possesses the ability to provide you with a windows of opportunity for high returns while minimizing your risk exposure throughout the process. For example, imagine that you have opened a ‘call’ CFD option which had an opening or strike price of $20. Now assume that you have achieved a favorable position and are now in-the-money with the current price standing at $24. However, you are worried that a serious price retraction could occur which could wipe out all your profits and could even cause losses. To safeguard your gains from such an eventuality, you could, at this point, open a new ‘put’ option and pair it with your original ‘call’ one.
By doing so, you would create an opportunity window between $20 and $24. This is because if the price finishes within this range at the expiry time then you will receive profit payouts from both options. In addition, you would also significantly reduce your risk exposure because should the value of the price finishes outside this window at the expiry time then the profit of one of your options will almost totally negate the loss of the other.
Many traders use CFD options as a method to hedge their investments with other asset types because they have been proven to be very effective. For example, consider that you are trading the EUR/USD currency pair and you are considering utilizing a stop-loss in order to protect your account balance from suffering a serious drawdown. Instead of deploying a standard stop-loss, you could instead activate a CFD option in the opposite direction to your Forex trade by using the EUR/USD as its underlying asset. By doing so, you would provide a very effective protection for your EUR/USD trade.
However, although a stop-loss trading strategy looks quite simple at first sight, a successful one depends on the quality of your understanding and knowledge about factors such as risk
tolerance, trading asset, and your trading style and market conditions.
INDEX-ASSET DIVERGENCE TRADE:
This is another popular strategy that entails hedging a CFD option based on a company’s shares with one whose underlying asset is the trade index that includes the same firm. For example, imagine that you decide to open a ‘call’ CFD option with Apple because you think the value of its shares will rise in the near future. In order to hedge this trade and if you also believe that the stock markets will generally fall in value, you could also consider activating a ‘put’ CFD option based on the S&P500 of which Apple is a composite company.
Consequently, this strategy will help you minimize your risk and allow you to support your trust in trading your selected asset. In addition, you could provide yourself with the opportunities
to compound your profits, maximize your returns and minimize your risk exposure. For instance, with the example just described you could achieve a double profit pay-out when your calculations is proven correct.
COMPETITOR RELATIVE VALUE TRADE:
This strategy can help you profit using CFD options by exploiting the opposite price movements of two competing companies. For example, imagine that Microsoft is about to release a new product that is expected to provide a significant boost to the values of its shares.
In addition, you also deduce that rivals, such as Apple, could suffer market share decrease which will have f negative influences on the values of their shares. Consequently, by following your fundamental and technical analysis to the fullest you should open a ‘call’ CFD option with Microsoft and a ‘put’ one with Apple.
This action will then provide you with the opportunity to collect double profits by taking advantage of the competitor relative value trade.
COMMODITY STOCKS AFFECT TRADE:
Many traders consider this to be a very powerful and effective CFD options strategy. Basically the idea is to exploit the variance in the movements of commodities on the share values of companies that trade them.
For example, significant movements in the price of aviation fuel can seriously influence the share values of airline companies. Consequently, if you believe that a spike in the price of aviation fuel is imminent then you could consider activating a ‘call’ CFD option with this commodity as its underlying option. In addition, you could hedge this trade by opening a ‘put’ CFD option based on the shares of an appropriate airline because you are anticipating them falling in value as a consequence of this development.
In summary, if you take your time to evaluate CFD options strategies such as those described above then you will find that this is a rewarding undertaking that could significantly boost your profits. This is because you can then provide with opportunities to compound your profits within the same time frame whilst minimizing your risk exposure in the process.
You will find by analyzing 10-Capital CFD options trading platform that it has been specifically designed with this purpose in mind. You will be very impressed about the quality and quantity of the impressive trading strategies and tools which are available to all 10-Capital clients especially.