Types of Options Traders
Posted by Pete Stolcers on February 26, 2010
Option Trading Question
Describe for me the different types of options traders.
Option Trading Answer
If you are looking at getting into options trading, then you should know that there are four different types of options traders. These include the long-term traders, the medium-term traders, the short-term traders and the day traders. For each of these different types of traders, there is a distinct options trading strategy and a whole different set of rules, strategies and ways of doing things. As a new comer to the trade, you should figure out which kind of a trader you would like to be, as well as which one you can afford to be.
Long term traders are the ones who hold their shares for one or more years. This can include future option trading and requires a great deal of patience on the trader’s part. It can be nerve wracking when you see the market changing and you know that you need to leave your options alone for another few months to a year, but the payout can end up being quite substantial which is what attracts many traders to this type of option trading.
Medium term traders are the ones who hold their stock anywhere from one to six months. These can include realty trading and are a good mix between the long term and short term trading strategies.
Short term option traders tend to hold their stock for a week but have been known to hold them up to a month. This is a much faster paced way of doing options trading and you really have to stay on top of what is going on in the market so that you can make quick decisions if you end up trading this way. This tends to be the way that a lot of the new options traders start out because you can quickly change things based on how you are feeling the market is about to go.
Day traders are, as you have surely guessed, options traders who buy and sell the stock in the same day. This is an incredibly fast paced environment and you really have to keep on the ball.
How do you do your options trading? Which type of trader are you?