Part 10 Trade Like Institutions

Option Trading Strategies

Options offer immense flexibility. Traders can combine calls and puts in various ways to create strategies suitable for bullish, bearish, or neutral markets. Some popular ones include:

Covered Call: Holding a stock while selling a call option to earn premium income.

Protective Put: Buying a put option to hedge a long stock position.

Bull Call Spread: Buying one call option and selling another at a higher strike to limit cost.

Bear Put Spread: Buying one put and selling another at a lower strike to profit from a downtrend.

Iron Condor: A non-directional strategy involving both calls and puts to profit from low volatility.

Straddle: Buying both a call and a put with the same strike to profit from big moves in either direction.

These strategies balance risk and reward depending on the trader’s view and volatility expectations.