This is a Bullish Options Trading strategy where the traders believe the underlying asset will move in the upward direction. But they want to protect the profit if the asset price doesn't move.
So the strategy is simple. Here you buy one At the Money (ATM) call option of an asset & Sell one Out of the Money (OTM) call option. It's important to note that the expiry date & the underlying asset of both the options should be the same. So when the price moves up a little, the ATM call option will move higher & the time-decay will help scalp some profits in OTM calls.
If the price goes down, OTM calls will decay faster, limiting the losses of ATM calls.
This is also a Bullish Options Trading Strategy where the trader believes the underlying asset shows little bullish momentum. It's almost similar to the Bull Call Spread strategy. The only difference is that you buy & sell Puts instead of Calls.
This is a bearish strategy that can be useful when the view on any asset is moderately bearish. This is a straightforward yet effective strategy. You buy 1 OTM call option & sell 1 ITM Call option for a particular strike price with the same expiry.
If the underlying asset price goes down as expected, you will get the premium of the ITM to call you sold & it will cover the slight loss of your OTM option.
If the price of the said asset goes up and you incur losses in shorted ITM Call Option, your losses will be reduced by the profits in the Long OTM Call Option.
This strategy comes into play when a trader has negative sentiment about any underlying asset. Deploying this strategy, a trader can make money even if the market is down slightly.
The strategy is pretty simple. You buy an In the Money (ITM) Put option & Sell (OTM) Put option. Both the options should have the same underlying asset & expiry date.
If the asset falls a bit as predicted, the trader will gain profit in ITM puts & minor or no loss in OTM puts. The reason is time decay or theta decay. If the asset moves up, ITM put will reduce, but the OTM will offset the losses puts you sold.
Proper knowledge of Options Trading Strategies is requiring gaining expertise and our experts has that excellent knowledge, to guide you properly.
This Options Trading strategy minimizes the risk of loss in any invested stock. This options trading strategy is very effective, especially if you think you are not sure about the direction of the store. Here, you have to buy a stock usually & sell the Call options of the same stock. E.g The stock you are buying has a lot of 100 stocks in an opportunity. So you will buy 100 stocks & will sell one lot of the Call option.
So when a stock price increases quickly, your losses in the shorted Call options will be covered by the Long Stock position. Similarly, if the market goes down, you will offset your loss in the long stock position with the shorted call option.
This options trading strategy is perfect if the investor is ready to take small losses to realize a total gain. In practice, this strategy can be helpful only when the underlying asset moves in any direction.
The strategy is pretty straightforward. You buy a Call option & Put the possibility of any underlying asset with the same strike price & expiry. Your maximum loss will be the sum of the premium you paid for both options.
Now, no matter in which direction the stock price moves, your trade will turn profitable if it shows a quick movement.
These Options Trading strategies can be helpful in case there is a high chance of a significant move of the asset in any one direction. E.g., this strategy is beneficial when the quarterly or yearly results are coming out.
Here you have to buy the OTM call option & OTM put options. As OTM options are cheaper than ATM options, the investment & hence possible loss will be less. The benefit of Long Strangle over Long Straddle, it's less expensive.
Now, if the underlying asset shows a significant move in any direction, OTM will become either ATM or ITM & you can reap good profit from it. But the pre-condition here is the movement should be significant & rapid. Otherwise, the time-decay will kick in & premiums will decay.
This options trading strategy is useful when the view of any underlying asset is slightly bearish to neutral. This strategy can help you earn a profit, even if the price moves upside. But the maximum gain will be realised only when the price quickly moves downward.
In this strategy, you must buy 1 ATM call & 2 ATM Puts.
Ensure the options are of the same asset, strike price & same expiry. The maximum profit in this strategy is unlimited & maximum loss is equal to the sum of the net premium you paid to buy all the options.
There are times when the market is poised to show no movement, i.e., the view on the market is neutral. In such situations, these Long & Short Straddles can help you earn profit.
In Long Straddle, you have to buy the ATM call option & ATM put option of the same underlying asset & the same expiry. Here the profits are unlimited, but losses equal the total premium paid.
In Short Straddle, you have to sell ATM call options & ATM put options of the same underlying asset & the same expiry. Here the maximum profit is equal to the sum of the premiums of the options you sold & losses are unlimited.
This Options Trading strategy is similar to the above-mentioned Long & Short Straddle. The only difference is, in Long & Short Strangle, you buy or sell OTM options instead of ATM options. This means the investment required for Long & Short Strangles is considerably less.
For Long Strangle, you buy one OTM call option & one OTM put option.
For Short Strangle, you sell one OTM call option & one OTM put option.
A significant movement in any direction will give you good profits.
Apart from these, there are a lot of other Options Trading strategies that traders use regularly. These are some of the most common ones. We will guide you in a proper manner for every Options Trading strategy. Want to learn more about Options Trading strategies? Connect Now
Each Options Trading strategy mentioned above is good. All you need is good knowledge & skills to implement it. And these are the things you cannot learn without practical knowledge. You need a systematic learning approach with the guidance of mentors like we have at getting together Financial. These specialists have created fully customized options trading strategies that are very efficient & tested in a real-life environment.
The strategies mentioned above are very common & readily available. So why don't all people make money They lack proper training & guidance. They do not have access to the knowledge necessary to implement these strategies effectively. Thankfully, you can have that knowledge by joining us to know more about Options Trading strategies. You can learn various advanced Options Trading strategies with our experts. So why delay? Start learning and earning today.