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Option Trading Strategies

Option Trading Strategies by Cetegories

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This is an introduction to various option trading strategies from basic trades to complex, multi-leg trades. The strategies are grouped by market direction to help you decide which strategies might work best, based on your opinion of which way you believe the underlying index or stock is going to move. Once you've isolated on a security you believe will either go up, down, or stay flat, use this guide to help you choose a strategy which meets your risk/reward criteria. We've also added options strategies for those who are interested in hedging or generating income from their portfolios. You'll find that several of the strategies fit into more than one category.

Bull Market - Strategies for trading options when you believe a certain stock or index will go up in value. Bull market strategies include:

  • Buy Calls
  • Sell Naked Puts
  • Bull Call Spreads
  • Bull Put Spreads
  • Call Back Spreads

Bear Market - Strategies for trading options when you believe a certain stock or index will go down in value. Bear market strategies include:

  • Buy Puts
  • Sell Naked Calls
  • Put Back Spreads
  • Bear Call Spreads
  • Bear Put Spreads
  • Synthetic Shorts

Neutral Market - Strategies for trading options when you believe a certain stock or index will remain relatively stable, or you believe it will move, but are unsure of which direction. Neutral market strategies include:

  • Reversals
  • Conversions
  • Collars
  • Straddles
  • Strangles
  • Butterflies
  • Ratio Spreads
  • Condors
  • Calendar Spreads

Hedging - Strategies for trading options when you want to protect your portfolio or concentrated stock positions from a down turn in the market. Hedging strategies include:

  • Protective Puts
  • Married Puts
  • Collars

Income - Strategies for trading options when you want to generate streams of income. Income generating strategies include:

  • Covered Calls
  • Sell Naked Calls
  • Sell Naked Puts
  • Iron Condors
  • Credit Spreads

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