Hi Friends, we can see some options trading strategies. Have you any idea about options trading? No means it is not at all a problem.
You can learn very easily from this article. Although most novice traders or investors can employ the strategies outlined here, there are more complex strategies than simply buying calls or puts. Although we discuss many of these kinds of strategies elsewhere, here are a few others that might be of interest to those comfortable with the ones mentioned above:
- Married put strategy
- Protective collar strategy
- Long strangle strategy
- Vertical Spreads
Basic options trading strategies
In the same way as a protective put, the married put involves buying an at-the-money (ATM) put option for an amount that covers an existing long position in the stock.
Protective collar strategy
An investor who holds a long position in the underlying buys an out-of-the-money (i.e., downside) put option while simultaneously writing an out-of-the-money (upside) call option.
Long strangle strategy
The strangle buyer buys both an out-of-the-money call option and a put option at the same time, similar to the straddle. Despite sharing the same expiration date, they should have different strike prices: The put strike price should be below the call strike price. In order to be profitable, the stock must either move higher or lower to the downside, requiring a lower premium than a straddle.
Vertical Spreads: options trading strategies
In a vertical spread, options with the same type (either a put or a call) and expiry are bought and sold at different strike prices at the same time. Bull spreads and bear spreads will profit when the market rises or falls, respectively. Since you also receive the options premium from the one you sold, spreads are less costly than long calls or long puts. However, this limits your upside potential to the width between the strikes as well.
Advantages and Disadvantages of options trading strategies
You have a great upside potential with options because you can only lose as much as the option premium if you buy them. However, this can also be a drawback since options expire worthless if the stock does not move enough to be in the money. Therefore, buying many out-of-the-money options can be costly.
Options can be beneficial, offering the potential for higher returns and the ability to leverage investments. For instance, an investor who has $1,000 to invest in a particular firm may make more profit by purchasing $1,000 of its call options than if they bought shares of that company directly. This increases their buying power as well. To reduce any existing exposure to that company, that same investor could get risk protection by selling put options against it.
options trading strategies:
Options contracts are complex and difficult to price, making them more suitable for experienced investors. Despite this, in recent years they have become increasingly popular with retail investors too. As options can offer large potential gains or losses, it is vital that investors understand the possible outcomes before taking any action. Neglecting to do so could result in major losses.
The risk of selling options is also large since you take on theoretically unlimited risk with profits limited to the premium (price) received.