I believe at the money options (ATM) are the best stock option for beginners to trade. And it has nothing to do with the profit potential of the trade.
Have you ever looked at an option chain? There are hundreds of option contracts listed and new traders have no idea which one to trade.
So they usually go with the most common method for new traders. Picking the cheapest ones, the "out of the money options".
At the money options provide a safe and relatively inexpensive choice for new traders.
So what does ATM mean?
At-the-money (for puts and calls) is where the stock price and the strike price are the same. Or an option contract with a strike price closest to the current stock price. For example: Stock Price $40.98 and Strike Price $40.
The reason I said new traders should pick the ATM option is because it's a sweet spot in regards to the risk/reward balance.
Out of the money options are cheap. They have the potential to give you the greatest reward if the stock moves in price, but they are also the riskiest to trade because the stock has to make a significant move.
In the money options cost more, but people like them because they generally move dollar for dollar with the stock price.
And to be honest most of the info you read on in the money, out of the money, and out of the money won't make much sense until you actually start trading and can "see" what I'm referring to.
Until then, just try your best to comprehend the concepts and at least get the basic definition down.
ATM: the strike price and the stock price are the same or nearly equal to each other.
I don't know what has brought you to my page. Maybe you are interested in options to help you reduce the risk of your other stock market holdings.
Maybe you are looking for a way to generate a little additional income for retirement. Or maybe you've just heard about options, you're not sure what they are, and you want a simple step-by-step guide to understanding them and getting started with them.
I have no idea if options are even right for you, but I do promise to show you what has worked for me and the exact steps I've taken to use them to earn additional income, protect my investments, and to experience freedom in my life.
If you want to learn more, I invite you to download a FREE video case study on how to trade options like Warren Buffett.
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