Looking for some option strategies to implement in your trading? Check out some basic and advanced trading strategies to help you create bullish, bearish and neutral positions.
- Long Call: Buying a call allows you to define your risk – the option’s premium. An increase in volatility helps your position, while time erosion hurts your position.
- Bull Call Spread: A bull-call spread can be executed by purchasing a call option at a specific strike price while also selling the same number of calls of the same asset and expiration date, but at a higher strike. This spread is best to use when you are moderately bullish.
- Call Backspread: A call backspread is executed by selling one call and simultaneously buying two calls at a higher strike. This strategy is best to use when you are very bullish.
- Covered Call: A covered call is a strategy in which the trader buys an asset and sells calls on the same asset in an attempt to generate extra income from the asset.
Protective/Married Put: This strategy involves buying a put option on an underlying asset that you already own. The position protects you from price depreciation in the underlying asset.
- Long Put: Buying a put allows you to define your risk – the option’s premium. An increase in volatility helps your position, while time erosion hurts your position.
- Bear Put Spread: To execute a bear put spread you must sell a put and then buy a put at a higher strike.
- Put Backspread: Involves selling one put and simultaneously buying two puts at a lower strike. Increased volatility usually helps this position while time erosion usually hurts the position.
- Collar: Involves buying a put and selling a call with a higher strike price while owning the underlying asset. The goal of a collar is to protect profits gained in the underlying asset.
- Short Straddle: Selling a call and selling a put at the same strike.
- Long Straddle: Buying a call and buying a put at the same strike.
- Long Strangle: Buying a call and buying a put at a lower strike.
- Short Strangle: Selling a call and selling a put at a lower strike
- Long Call Butterfly: Involves selling two calls, buying one call at the next lower strike and buying one call at the next higher strike, while making sure the strikes are equidistant. For example, in an option on the E-mini S&P 500 futures trading at 1500 – you would sell two 1500 calls, buy a 1495 call and buy a 1505 call.