Creating the best stock trading strategy in Japan
Today we will look into how to invest in Japan. The first thing needed is a solid investment strategy that we can implement and use for years to come.
We need to ensure maximum profits and minimum losses at all times, both achievable using the right tools and strategies available today.
First, let’s start with an explanation of what options are exactly:
“Options trading is the buying or selling of either Call Options or Put Options.”
It means you can purchase stock options – this means you could buy one option contract (1 option contract = 100 stocks) and make a lot of money if the value goes up!
You don’t own these stocks, though; they belong to someone else. Options are a derivative, which means that the underlying asset is either stock or index. There’s no paper associated with this transaction other than your purchase agreement.
You can also sell options, meaning you make money when:
- the options expire, and they become worthless because the stock value hadn’t changed from what it was when you purchased them or
- upon purchase of the option contract by another party at a strike price lower than what you sold it for if it’s a put option.
The contracts last one month and then end unless extended. How much does all this cost? Not anything – you don’t have to pay if someone purchases your option or not!
You only pay when you open an option contract to give yourself a position in either a call or put option.
The most popular options strategies are:
This is the strategy where you own an underlying asset and write (sell) call options against it to generate income. This means that if someone purchases the call, you give them the underlying asset at their specified strike price. The easiest way to do this is by owning 100 shares of stock for every one contract you write – also called hedging because it’s meant to balance out your risks in case the value goes down instead of up. This only makes sense if the dividends are worth more than what you get from selling the calls, though!
Tough to master but highly profitable, pairs trading involves finding two stocks with something in common.
They both make products the consumer wants, like Pepsi and Coca-Cola) and then open opposite positions (shorting one while going long on another).
This way, if the value of either stock goes up or down, you profit off of this.
A more complicated strategy involving covered calls – if the price goes too low, you buy more shares (and thus receive more dividends).
If it goes too high, you sell your existing shares to reduce your overall market exposure.
Strangles are similar except that you don’t own any underlying assets; instead, they are options contracts on an index.
Upside doesn’t matter because you already made money with the premiums, so losses only come from paying too much for the contracts.
Bull Call Spread
When you think the stock value may go up, but you’re not sure, this is a strategy I would use because it limits your downside risk if it doesn’t rise.
If the stock doesn’t make it to strike two before the expiration of the options contract, well, you can always buy to cover them!
This is cheaper than buying call options outright, though, so it’s worth looking into if you want protection without sacrificing too much profit potential.
Bear Put Spread
This works for bear market conditions or when there’s uncertainty about how low the price might go – again, limit your downside by paying less for these contracts!
It’s pretty clever because if people are uncertain about where the price is going, it means more people will be selling (thus driving down the price), meaning you make money off the difference between selling and buying prices.
Max Loss Selling
This strategy is for when you think the stock may go up but not by too much – how does $1000 sound? You sell to open a put option contract at an exercise price of $1000, then buy to close it right away.
This way, you lock in your profit without waiting. If the value goes below $1000, congrats because that’s called “doubling up!”
You can keep repeating this process until expiration day or until someone buys an option somewhere along the line, which means congratulations because now they owe you money!
Japan’s best stock trading strategy is to buy and sell regularly and wait patiently. If you think a stock will go up or down, take the appropriate action and if it doesn’t work out well, buy and sell regularly to recoup losses and learn from mistakes.
With so many choices available – especially online – there’s no reason not to try your hand at investing in stocks!
Link to Saxo for more information and to buy stocks.