Scribd
Upload
5K views

Options Trading Strategies

This document provides an overview of various options trading strategies categorized as bullish, bearish, or neutral depending on the market outlook. It describes common spread strategies like bull call spreads and bear put spreads that limit risk and define when they would be used, such as for an undervalued option with increasing volatility. Strategies are also outlined for special market situations like covered calls, puts, and synthetic futures positions to collect premium in a likely moving market.

Uploaded by

sumeetsj
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
5K views

Options Trading Strategies

This document provides an overview of various options trading strategies categorized as bullish, bearish, or neutral depending on the market outlook. It describes common spread strategies like bull call spreads and bear put spreads that limit risk and define when they would be used, such as for an undervalued option with increasing volatility. Strategies are also outlined for special market situations like covered calls, puts, and synthetic futures positions to collect premium in a likely moving market.

Uploaded by

sumeetsj
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
You are on page 1/ 6

Options Trading Strategies

Key Points to Remember:


ALL options eventually lose ALL of their "time value." ALL "Out-Of-The-Money" options expire worthless. Markets only "trend" 1/ of the time! they move sideways the other "/ .

BULLISH Market Strategies


Option Spread Strategy
#uy a $all %ell a *ut

Description

Reason to se

!"en to se
(ndervalued option with volatility in)reasin&.

%tron&est 'ullish option Loss limited to position. premium paid. +eutral 'ullish option position.

*rofit limited to ,i&h volatility- 'ullish premium re)eived. trendin& market. %mall de'it- 'ullish market.

#uy .erti)al #ull #uy $all / sell $all of Loss limited to $all %pread hi&her strike pri)e. de'it. %ell .erti)al #ear %ell *ut / 'uy *ut of *ut %pread lower strike pri)e.

Loss limited to strike pri)e Lar&e )redit- 'ullish differen)e less market. premium re)eived.

B#$RISH Market Strategies


Option Spread Strategy
#uy a *ut %ell a $all

Description

Reason to se

!"en to se
(ndervalued option with in)reasin& volatility. Option overvaluedmarket flat to 'earish. %mall de'it- 'earish market.

%tron&est 'earish option Loss limited to position. premium paid. +eutral 'earish option position. *rofit limited to premium re)eived.

#uy .erti)al #uy at the money *ut / Loss limited to de'it. #ear *ut %pread sell out of the money *ut. %ell .erti)al %ell $all / 'uy $all of #ull $all %pread hi&her strike pri)e.

Loss limited to strike Lar&e )redit- 'earish pri)e differen)e minus market. )redit.

%#UTR$L Market Strategies

Option Spread Strategy


%tran&le Ar'itra&e $alendar

Description

Reason to se

!"en to se
Tradin& ran&e market with volatility peakin&.

Maximum use %ell out of the money *ut / $all. of time value de)ay. #uy / sell similar options simultaneously. %ell near month- 'uy far monthsame strike pri)e. #uy at the money $all 0*ut1 / sell " out of the money $alls0*uts1 / 'uy out of the money $all 0*ut1. %ell in the money *ut / $all. %ell $alls / *uts same strike pri)e. #uy $all / sell $alls of hi&her strike pri)e.

*rofit )ertain if Any time )redit done at )redit. re)eived. +ear month time value de)ays faster. %mall de'it- tradin& ran&e market.

#utterfly

*rofit )ertain if Any time )redit done at )redit. re)eived. 3e)eive lar&e premium. Options have time premium / market in tradin& ran&e.

2uts #ox

*rofit )ertain if Any time )redit done at )redit. re)eived. Lar&e )redit / +eutral- sli&htly differen)e 'etween 'ullish. strike pri)e of option 'ou&ht / sold.

3atio $all

$onversion

#uy futures / 'uy at the money *rofit )ertain if Any time )redit *ut / sell out of the money $all. done at )redit. re)eived.

Specia& Market Sit ations

Option Spread Strategy

Description

Reason to se

!"en to se

%traddle *ur)hase #uy *ut / $all. $overed $all $overed *ut #uy future / sell $all. %ell future / sell *ut.

Options will lose time Options under-valued / value premium market likely to make a 'i& 4ui)kly. move. $olle)t premium on $alls sold. $olle)t premium of *uts sold. +eutral- sli&htly trendin& market. +eutral to sli&htly 'ullish. +eutral to sli&htly 'earish. 3e)eive )redit- option sold far out of the money.

%yntheti) futures #uy $all 0*ut1 / position. %ell *ut 0$all1.

'( Option Trading Strategies

$all 'a)kspread

Lon& *ut spread or 'ear spread %hort )om'o 0volatility down1

$all ratio spread

Lon& semi-futures 0volatility up1 Lon& semi-futures 0volatility down1 Lon& straddle Lon& stran&le Lon& &ut stran&le Lon& $all syntheti) Lon& $all semi-futures syntheti) 0volatility up1 Lon& $all semi-futures syntheti) 0volatility down1 Lon& *ut syntheti) Lon& *ut semi-futures syntheti) 0volatility up1 Lon& *ut semi-futures syntheti) 0volatility down1 Lon& underlyin&

%hort )ondor $all

Lon& $all al'atross Lon& &ut iron al'atross Lon& iron al'atross Lon& al'atross *ut Lon& 'utterflies $all Lon& 'utterflies &ut iron

%hort )ondor &ut iron %hort )ondor iron %hort )ondor *ut %hort fen)e 0volatility up1 %hort fen)e 0volatility down1 %hort $all

Lon& 'utterflies iron Lon& 'utterflies *ut Lon& $all )hristmas tree Lon& $all spread or 'ull spread 0volatility up1 Lon& $all spread or 'ull spread 0volatility down1 Lon& )om'o Lon& $all )ondor Lon& &ut iron )ondor

%hort *ut %hort *ut )hristmas tree %hort *ut spread or 'ull spread 0volatility up1 %hort *ut spread or 'ull spread 0volatility down1 %hort semi-futures 0volatility down1 %hort semi-futures 0volatility up1 %hort straddle %hort stran&le

*ut 'a)kspread *ut ratio spread %hort $all al'atross

Lon& iron )ondor Lon& )ondor *ut Lon& fen)e 0volatility up1 Lon& fen)e 0volatility down1 Lon& $all

%hort &ut iron al'atross %hort iron al'atross %hort *ut al'atross

%hort &ut stran&le %hort $all syntheti) %hort $all semi-futures syntheti) 0volatility up1 %hort $all semi-futures syntheti) 0volatility down1 %hort *ut semi-futures syntheti) 0volatility up1 %hort *ut semi-futures syntheti) 0volatility down1 %hort *ut syntheti) %hort underlyin&

%hort $all 'utterflies

%hort &ut iron 'utterflies

Lon& *ut Lon& *ut )hristmas tree Lon& *ut spread or 'ear spread 0volatility up1 Lon& *ut spread or 'ear spread 0volatility down1 Lon& semi-futures 0volatility up1

%hort iron 'utterflies %hort *ut 'utterflies %hort $all )hristmas tree %hort $all spread or 'ear spread 0volatility up1 %hort $all spread or 'ear spread 0volatility down1

You might also like