Taking a Put Option Long Position

Just like any other Put Options, ETF Put Option offers a trader to get an exposure or hedge the downward fluctuations in the market. Basically, with put options a trader has a right to sell an ETF at an agreed up-on price (strike price). For example, if a trader goes long on April 150 put he has a right to sell the respective ETF for $150 and a trader can execute this right anytime before April.  Even if the respective ETF trades at $120 trader can sell the ETF at $150.

Taking a Put Option Short Position

When a trader goes short on put options, he gives a right to the other party who has a long position on that put to sell the ETF at the agreed upon strike price at any time before expiration. This is an opposite of having a long position but it is similar to going long on a Call option. For example, if you take a short position on an April 150 put for $20, a trader would want these ETFs to not go below the $150 mark or else he might start incurring a loss on his investments.

Taking a Call Option Long Position

With this type of Call option a trader has a right to buy the agreed quantity and type of Exchange Traded Funds at a certain price (the strike price). So if a trader takes an April 150 Call option Long position, he has a right to buy the respective ETF for $150 anytime before April. Therefore even if the price of the respective ETF climbs to $170 a trader in contract can still buy that ETF for $150.

Taking a Call Option Short Position

As part of this strategy a trader can take a short position so you want the value of ETF to decrease. So if a trader sells April 150 Call option for $12, he will make money if value of the respective ETF never goes above $150.

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Sector ETF trading strategy: Some traders love trading in a specific stock, if your broker is asking you to increase your exposure to a specific sector it becomes tough to sort out which stock can give best returns in that sector. You don’t need to rely on anyone’s instincts but also you don’t want to miss out on the bus. In this situation the best strategy for a trader can be to look at Sector Specific ETF’s.

Stock ETF pair strategy is one of the favorites of hedge funds. Let’s say if you are eyeing at getting highly invested into a particular stock because you think it will give the best returns in comparison to other stocks in that sector, but you are worried about the direction of the whole sector on the next go. In this case you can buy the particular stock and short that stock’s sector ETF. Reverse is true also if you think a particular company’s stock is going to perform worse you can short that company’s stock and on the other side go long on sector ETF in which that stock belong to. Since the trader is hedging his position this can be a great investment opportunity that is if he has intimate information about some company and an industry. However this is not a “No Risk” strategy, if the company’s stock as well as the sector both moves in completely contradictory directions of what a trader thought he has to bear a loss on both the trades.

If an investor usually has huge cash sitting in his portfolio, rather than exposing his investments to money market funds a trader can invest in short-duration Bond ETFs. Return on investment in these ETFs is two to three times the returns a trader gets by investing the same funds in money-markets.

Therefore don’t let the current economic conditions discourage you because there are ETF trading strategies with which a trader can not only earn their bread and butter but if used effectively can help you beat the market and make a fortune out of it.

Make 6% Per Month in ETFs. Trade only 10 minutes per evening. Click here to learn more.

This post via the etf trading blog which is your guide to learn everything related to ETFs trading.