One of the most suggested ways to raise wealth and increase profitability is an investment in options trading. If traded properly, an investor will be able to gather enough wealth in the long term. An option contract is a trading tool that allows an investor to buy and sell an underlying stock or index. The price is pre-determined and the period is also specified. Under this contract, the buyer pays the premium to the seller.
If you are a novice and do not know much about options training and options strategy building, then here we cover all the things you would want to know.
What Is An Options Strategy Builder?
The first thing you need to know about is the options strategy builder. This tool enables investors to create their own options trading strategies. The traders can not only build but evaluate, assess, and implement their custom-made strategies from a place.
How Does It Work?
The options trading strategy aims to maximize profit. If you want to build a good options trading strategy, then you first need to determine whether you want to go for a long, short, or mixed type of option. Based on your goals, you can analyze the strategy using the charts and payoff, and begin the strategy.
The options strategy builder helps the user to devise strategies, tailor-made to suit your requirements. The good part is, you can use a range of popular F&O strategies such as Bull Call, Straddle, Strangle, Butterfly Spread, and more.
Before giving them a try, you need to know about them well. This will help you decide which strategy is more aligned with your trading style.
Bullish Option Trading Strategies
Let us know about some of the Bullish Option Trading strategies first.
Bull Call Spread
Bull Call Spread is one of the debt spread option trading strategies. In case of an investor being you’re bullish on a stock but does not want to take the chance of buying shares, can purchase a low-risk call option. It is also important to know that Call options are expensive and can pose a higher risk at times. At this time, buying Bull Call Spread is the best way to lower your cost as well as risk.
Bull Put Spread
As an investor, if you have a feeling that the cost of the underlying asset is going to rise in the coming times, you can invest in called Bull Put Spread. This Options Trading Strategy falls under the Credit Spread category. One of the easiest Option Trading strategies, you can sell a put option and buy the same at a low strike rate.
Bull Call Ratio Backspread
For this trader, it is expected that the trader is extremely bullish, as moderate bullish on the stock is not an option here. One drawback of this Bull Call Ratio Backspread strategy is that the trader would want the trade to move. At times, the trader doesn’t want to buy the call option and prefers Bull Call Ratio Backspread as the best option selling strategy.
Synthetic Call or Synthetic Long Call happens when the investors buy and keep shares. The trader may purchase stock at the money to hedge against declining stock prices.
Bearish Option Trading Strategies
Coming to the Bearish Options Trading Strategies, here are your options:
Bear Call Spread
When the investor is too bearish, Bear Call Spread – the double options trading strategy might work. In this method, a short-term call option is sold and a long-term call option is bought. The underlying commodity and expiration date remain the same, though the strike price is higher.
Bear Put Spread
When the trader feels that the price of a stock is going to fall, they use Bear Put Spread. This strategy means buying Put Options and selling the same for the same expiration date at a lesser price.
Strip Strategy is for those who are bullish when the market is volatile and bearish when the market is in direction. This strategy uses At-the-Money Put and Call Options, which need you to have the same name underlying stock and expiration month.
Neutral Option Trading Strategies
There are Neutral Options Trading Strategies too:
It is imperative to know about both the long and short straddles. One of the finest Options Trading Strategies, it is easy to implement. In a long straddle, there is no impact of profit and loss when the same is applied, irrespective of the market movement. In a Long Straddle, one buys a long call and a long put.
Coming to the Short Straddle, in this options strategy, the investor buys a short call and short put when the market is not volatile.
Again, there are long and short strangles. In the long strangle or buy strangle, the investor buys OTM Put Options and Call Options for the same asset at the same expiry date when high volatility in the market is expected. A short strangle aims to sell put and call simultaneously.
Other Option Trading Strategies
It is also important to know a few more.
A protective collar strategy happens when put OTM are bought and call OTM are written. When the investors make enough gains in the long run and want protection, they invest in this strategy.
This strategy makes momentum in the market and tracking of a few stocks. With the market change, traders can buy or sell assets.
This intraday trading strategy needs the investor to look for the broken stocks or the stocks that are going to use a new price range for trading.
In this strategy, the investment decisions do not match the market trend and focus more on calculations.
Other than the ones listed above, traders can use many other option strategies that generate more returns. Do calculate potential risks before investing. Use the Options Trading App to know more and trade successfully.