Advanced Option Strategies

As a trader or funds/portfolio manager, your fist duty to your account and that of your clients is to preserve capital before you begin to consider profit taking in any markets. The techniques I will be discussing here are very crucial for all traders including funds managers. It pays great dividends to the trader who desires to keep and multiply profits to learn the techniques that will help them preserve their trading capital.In this piece, I want to expose 3 basic techniques for preserving your trading capital irrespective of what you trade; forex, commodities like crude oil, options, stick etc. these techniques and strategies, if well applied will not help you preserve capital but can make you ultra rich over time. Here are they; hedging, the use of Japanese candlesticks and trailing stop I will take them one after the other.Hedging many misunderstand the purpose of hedging and how and when to apply it as a strategy. I will do my best to clear up the confusion in this piece. I will try to define hedging in a lay mans view and then go on to show and when to use it.Hedging in financial terms is any techniques designed to reduce or eliminate financial risk; for example, taking two positions that will offset each other if prices change. In trading many apply this strategy only when they see a position has mated tremendously against them, and they do it out of fear rather than as a plan. We were in my trading room one day when a position we opened moved against us; one of the traders suggested we hedge and I said no because it was not in our trading plan for that period, and it was not long when the correction was over and price went back in our favour if we had all responded in fear we could have hedge wrongly. There are a few things you need to know about hedging:(1) Hedging needs to be in your trading plan before you employ it; do not use it in fear or panic else you may not be able to use it to preserve the capital it is meant for study situations properly before deciding whether or not to apply it.(2) The 2 positions being hedge ought to give you zero balance; what this means is that when you place a buy order for EUR/USD say at 1.27000, the sell order ought also to be at 1.2700. This is in a situation where the spread for EUR/USD is 2pips. I must say that this however may not always be at the case.