Question

8. You are convinced that Apple shares will increase over the next year. Name 3 different trades you could execute to make money?
9. You are convinced Tesla shares will fall in the next year; name 3 different trades you could execute to make money?

Answer 1

8. I could trade a call option to make profit from the rising stock price.

A call option is bought by a trader in exchange for a premium. In case the share price rises, the trader can profit from the difference between the stock price and the strike price.

I can sell a put option , when a trader sells a put option ,he will earn the amount of premium and as the stock price will rise, the buyer of the put option will not exercise the option and the option will expire worth less. I can earn the amount of premium as profits.

Synthetic long stock option strategy : in this strategy the trader will buy a call option and sell a put option simultaneously. In the end as the stock price rises, the trader will gain a profit as the put option holder will not exercise and it will expire worthless.

9. I can buy a put option : a put option gives the holder the opportunity to make a profit when the stock price falls below the strike price.

I can sell a call option : I can earn the amount of premium and the stock price will fall so the owner of the call option will not exercise and the option will expire worthless.

Synthetic short stock : in this strategy we buy a put and sell a call option . This is a bearish strategy. In this strategy we call profit from the put and the premium earned from selling a call.