Learning how to trade options can be a real challenge for anyone, and as a newcomer, this might seem overwhelming. But when you know the basics and have some help, it becomes a powerful way to make smart decisions with your money. Ally Invest is a well-known provider of online brokerage services and offers its users an easy-to-use platform for both new and experienced traders. In this article, we will explain what Ally Invest’s options trading is, how it works, and the advantages that come with it.
## Introduction to Options Trading: A Beginner’s Guide
Before explaining how Ally Invest’s options trading tools work, it might be helpful to define what options trading is. At its simplest, options are a type of security that gives the owner a right, but not the obligation, to buy or sell an underlying asset at a specific price until a specific date.
There are two types of options: **calls** and **puts**. A **call** option gives the owner the right to buy the underlying asset, while a **put** option gives the right to sell. Options are commonly used by investors to make predictions about the movement of asset prices, to reduce risk or to generate income from writing options.
## Introducing Ally Invest’s Options Trading Platform
Ally Invest has come up with a rather active options trading platform that has all the features and tools needed for making a correct investment decision. The layout of the platform is rather simple and even a new user will be able to find different trading strategies and make the trade quickly.
### Key Features of Ally Invest’s Options Trading Platform:
– **User-Friendly Interface:** The platform is designed in a way that any user can easily understand and navigate through different trade strategies and execute the trades easily.
– **Real-Time Market Insights:** You get access to the latest market information including options chains, implied volatility, and Greeks so that you can make a proper analysis of the trade options.
– **Options Strategy Scanner:** This feature assists users in selecting and sort options strategies based on the risk tolerance, time horizon, and investment objectives.
– **Educational Materials:** Ally Invest provides a library of articles, videos, and webinars that help newbies to learn about options trading and create their strategies.
– **Mobile Accessibility:** The options trading platform is also available in the mobile app, which means that traders can control their trades from their phones and receive all the updates on the market.
## Some of the Strategies in Options Trading for Newbies.
With the understanding of the features of Ally Invest’s platform, it is about time to discuss some of the strategies that are commonly used in options trading for new traders:
### 1. Covered Call
The covered call strategy entails selling call options on a asset which the investor owns. This way, investors can receive payment from the call options they sell to the premium while keeping the chance for the asset’s value to rise.
Let’s take, for example, an investor who owns 100 shares of XYZ stock, which is currently trading at $50 per share. The investor may decide to sell a call option with a strike price of $55 and receive a premium of $2 per share. If the stock price remains below $55 at expiration, the investor keeps the premium and can try again. However, if the stock price rises above $55, they may be forced to sell their shares at that price but they would still make money from the premium received.
### 2. Protective Put
This strategy entails the purchase of put options on a asset to help reduce the risk of a loss. In other words, it serves as insurance, enabling investors to set a ceiling on their losses if the price of the asset declines.
For instance, if someone owns one hundred shares of ABC stock, which currently trades at $100 per share, they could purchase a put option with a strike price of $95 and pay $3 per share for it. If the price of the stock declines below $95, the put gives the owner the right to sell the shares at that strike price, thus helping the investor limit his losses.
### 3. Long Straddle
The long straddle strategy is a strategy that involves the purchase of a call and put option on the same asset with the same strike price and expiry date. This trade is generally used by investors when they anticipate a high level of price movement but are uncertain about the direction of the price.
For instance, if an investor believes that XYZ stock, which is currently trading at $50, will have a high level of price movement, they could buy a call and put option with the same strike price of $50 and expiry date. If the price of the stock rises or falls significantly, the investor makes money from the in-the-money option, with the other option expiring worthless.
## In Summary
Ally Invest’s options trading platform is a perfect place for the newbie to start the process of becoming a strategic investor. As a result, the user will be able to utilize the core concepts of options trading and the various trading strategies to navigate the tools available on the platform effectively.
Whether it is through the use of covered calls to generate income, the use of put options to reduce risk or the deployment of long straddles to profit from volatility, Ally Invest has something to offer to every kind of investor regardless of their level of experience.
It is always important to remember that options trading is a high-risk activity. It is crucial to analyze the market and seek the advice of professionals before investing. With the right information and discipline, options trading can indeed be a valuable tool for an investor’s **portfolio**.
