Most Useful Options Strategies

Most Useful Options Strategies

For trading options or for trading in stocks, cryptocurrencies as well as in forex there are many trading bots available today. These are pieces of sophisticated algorithms that can capture market data and then extract relevant information to perform a technical analysis of the chosen asset. For those who wish to do it by themselves, there are online trading platforms that make the whole process so much convenient. Options trading might come with its risks but this can be a greatly profitable choice if you follow the right approach. If you are looking to maximize your profits made from trading options then here are some strategies that would help –

Naked call

Covered call and naked call are contradicting approaches that are both popular in their own ways. Here the sold call is laid without taking the ownership of the security in the picture. Naked calls can be quite risky but if you do it in bear markets or if you pick those stocks that are not very volatile you might end up making safe bets.

Covered call

This involves direct purchase of the concerned security by which you are mitigating the risks as you take ownership of the asset and its value. This is known to be one of the least risky strategies while trading options. This strategy can be very good in a falling market.

Credit spread

This is the spread that occurs due to the simultaneous sale and buys contracts. You would be buying a lower priced options contract while selling one that is priced higher. The cash outlay is made use of to earn profits. The strike prices should be different for the contracts bought and sold in order to create the spread. Vertical credit spreads are the most commonly used.

Iron Condor

To understand the iron condor you should know about strangle in options trading. For the same asset with the date of expiration when the trader holds both put and call options with the difference in the strike prices then it is called a strangle. In iron condor, short and long positions are held at the same time. Given the complexity of this strategy, most beginners might avoid this one.

Long straddle

In this case, the call and put options bought are both with the same strike prices for the same asset. The expiration date would also be the same. It can be used for price movements in both directions. When you identify an asset that is sure to show significant price movements but when you are not able to predict the exact direction then a long straddle would be a good option.