Options Strategies

There are many options strategies available and when you become comfortable with trading options, you can utilize them as you see fit in reference to your trading objectives. With trading options, one can make money numerous ways; if the stock goes up, goes down, trades sideways, and even if the stock does not even move at all. One just has to be selective and knowledgable about the right and correct strategies. The strategies are usually employ during my trading, depends on the stock but typically, I use the following:

  1. Long Calls- a long call gives you the right to buy the underlying stock at strike price A. Calls may be used as an alternative to buying stock outright. You can profit if the stock rises, without taking on all of the downside risk that would result from owning the stock. Buying calls gives leverage as it allows you to participate in buying shares in a stock at a fraction of the cost as opposed to buying the share outright.
  2. Long Puts- a long put gives you the right to sell the underlying stock at  strike price A. If there were no such thing as puts, the only way to benefit from a downward movement in the market would be to sell stock short. But with puts, you can make money when the underlying is going down.
  3. Long Straddle- is the great since you get to trade but the call and the put side at the same time. The idea is to profit if the stock moves in either direction, up or down. However, with such strategy volatility is required to break even and profit majestically. 
  4. Vertical Call Spread– is a strategy that allows one to benefit in the upward movement in the movement of a stock by buying a call ITM and selling an OTM call
  5. Vertical Put Spread– is a strategy that allows one to benefit in the downward movement in the movement of a stock by buying a put ITM and selling an OTM put

 

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