Best Kind of Markets to Trade Options In

 Best Kind of Markets to Trade Options In

Trading options is a very lucrative way to generate income. The major advantage of trading options is

that with proper risk management, you can make money regardless of what kind of market it is.

There are primarily two types of options traders; Option Buyers and Option Sellers. Option Buyers are

mainly directional traders. They take a trade expecting the market to either move up or down. On the

other hand, Option Sellers can be either directional traders or non-directional traders. Non-directional

traders take a trade expecting the market to stay sideways or in a range.

For Option Buyers, the best market to trade in is a trending market. When the market moves in one

direction, the premiums of either the Call or Put options increase. Momentum of the market’s direction

is an option buyer’s best friend.

Option Sellers can benefit from a trending market by either selling call or put options but they can also

benefit in a range-bound or sideways market by selling both, Call and Put options. This is possible due to

something known as Theta Decay. Theta Decay essentially erodes the premium of options as time

passes. So lesser the markets move, more the premiums lose value over a period of time.

A sideways market is the worst kind of market for an Option Buyer to trade in as they won’t be able to

see a significant rise in premium and over time the premiums will lose value.