What are Option Trading Strategies?

Methods of Option Trading Strategies

These are some of the methods you can try for yourself:-

1. Bull Call Spread

The “Bull Call Spread”call strategy is designed to assist you in making money from a stock’s or index’s slight price increase. In this method, a range is created by using two call options, a lower strike price, and an upper strike price. A bull call spread might be a successful tactic if your optimism for the company or index is strong. It is preferable to avoid using a bull call spread if you think that the company or index has a significant amount of upward potential.

2. Bull Put Spread
A bull put spread options strategy uses one short put with a higher strike price and one long put with a lower strike price. Remember that the
underlying stock or index and the expiration date are the same for both puts. A bull put spread, like a bull call spread, can be a successful strategy
when you are fairly bullish on the firm or index. The bull call spread is executed for debit, but the bull put spread is executed for credit, meaning that money comes into your account as soon as you execute the trade.

3. Bear Put Spread
Purchasing one put and selling another put with a lower strike is a bear put spread. Its purpose is to offset the upfront cost a little. One put is purchased as part of the options strategy in the hopes of benefitting from a drop in the underlying stock or index. However, you can reduce the cost by writing a second put with the same expiration and a lower strike price. This winning tactic necessitates initial net cash spend or a net debit.

4. Bear Call Spread
A double options trading method known as a Bear Call Spread may be used if one’s outlook on the market is primarily unfavorable. By employing
this strategy, a trader will sell a shorter-term call option while concurrently purchasing a longer-term call option with a higher strike price and the same underlying asset and expiration date. One obtains a net profit by obtaining a bigger option premium on the call sold than the cost of the call purchased.

5. Synthetic Put

The term “Synthetic Put” refers to a method used by an investor who shorts a stock and buys a call, risk-equivalent to buying a put option. By owning both a short stock position and a long call option on the same stock, this option strategy resembles a long-put option. In a word, it’s a strategy that traders might use if they have a bearish wager on a stock but are worried about its likelihood of showing near-term strength.

6. Put Ratio Back Spread

A bearish options trading method is the put ratio back spread. It entails a number of put option sales followed by the purchase of further put options
with the same underlying stock expiration date and lower strike prices. For net credit, the put ratio back spread is used. When you have a pessimistic outlook for the company or index, this is a profitable approach. The put ratio back spread may yield a small profit if the index or stock price rises, but it may yield an unlimited profit if the index or stock price declines.

7. Strip

The Strip Strategy must be used by an investor who is optimistic about volatility and pessimistic about the market’s direction. This approach
involves buying two lots of “At-the-Money put Options” and “At-the-Money call Options” Both alternatives must use the same underlying security and expiration month. A bearish form of the Strip is identical to the standard Long Straddle. When the underlying makes a substantial move at expiration, moving more favorably in the direction of loss, the Strip Strategy may produce a significant profit.

Many long-term investors, merchant bankers, financial institutions, and other people and organizations use options strategies to increase their
wealth. You can also learn this by joining a good SPX Income Program.