Options trading enables us to purchase or sell stocks, ETFs, and other securities at a set price and on a certain date. This method of trading also allows purchasers the option of not purchasing the securities at the stated price or on the given date. Options are a little more complicated than stock trading, but they may help one to generate more gains. When you acquire an option, you get the opportunity but not the obligation to exchange the underlying asset.
A call option offers you the right to purchase an underlying securities at a specific price within a specified time frame. A put option, rather than giving you the choice to acquire an underlying asset, provides you the option to market it at a certain price. When you buy a call, you're purchasing a contract to acquire a specific stock or asset by a specific date, similarly when you acquire a put, you're purchasing a contract that offers you the opportunity to sell securities at a specific price by a specific expiration date.
Option Trading Strategies are broadly classified in three major categories
a) Bullish
b) Bearish
c) Neutral
d) Others
The Bullish Strategies including Buy Call, Sell Put, Bull Call Put and Bull Put Spread will be explained in this blog and Bearish including Buy Put, Sell Call , Bear Call Spread , Bear Put Spread and Put Ratio Back Spread and other two categories in the other blog of the series.
Bullish Option Trading Strategies
Buy Call
A simple trading option strategy in which you receive the option premium in return for the right to acquire shares at a particular price on or before a specific date when you buy a call. When an investor is optimistic on a stock or any other investment, they frequently purchase calls since it gives them leverage. Purchasing calls and then trading them for a return might be a great strategy to boost the performance of your portfolio.
Sell Put
Another simple trading option strategy in which you promise to purchase an asset at an agreed amount. As the price of the underlying asset drops, Put options gains value, the volatility of the underlying securities price rises, and interest rates fall. Movements in the value of the underlying security, the option strike price, time decay, interest rates, and volatility all affect the price of put options.
Bull Call Spread
Generally Spreads are multi-leg techniques in which two or more options are traded. The strategy is to employ two call options to generate a strike price range with a lower and upper strike price. One lengthy call with a price lower and one shorter call with a greater price make up a bull call spread. When a trader bets on a stock's price increasing only little, he or she uses this options strategy. In addition the bullish call spread might help to prevent stock losses while also limiting gains.
Bull Put Spread
As the name suggests the bull put spread is created by using 'Put options' rather than 'Call options' to create a spread. This makes it similar to the Bull Call Spread somewhat similar to Bull Call Spread. An investor conducts a bull put spread by acquiring a put option on a securities and purchasing additional put options for about the same date but at a bigger strike price. The disparity between both the strike prices and the net credit obtained is the maximum loss,
similarly the difference between the premium costs of the two put options is the maximum profit.
A call option offers you the right to purchase an underlying securities at a specific price within a specified time frame. A put option, rather than giving you the choice to acquire an underlying asset, provides you the option to market it at a certain price. When you buy a call, you're purchasing a contract to acquire a specific stock or asset by a specific date, similarly when you acquire a put, you're purchasing a contract that offers you the opportunity to sell securities at a specific price by a specific expiration date.
Option Trading Strategies are broadly classified in three major categories
a) Bullish
b) Bearish
c) Neutral
d) Others
The Bullish Strategies including Buy Call, Sell Put, Bull Call Put and Bull Put Spread will be explained in this blog and Bearish including Buy Put, Sell Call , Bear Call Spread , Bear Put Spread and Put Ratio Back Spread and other two categories in the other blog of the series.
Bullish Option Trading Strategies
Buy Call
A simple trading option strategy in which you receive the option premium in return for the right to acquire shares at a particular price on or before a specific date when you buy a call. When an investor is optimistic on a stock or any other investment, they frequently purchase calls since it gives them leverage. Purchasing calls and then trading them for a return might be a great strategy to boost the performance of your portfolio.
Sell Put
Another simple trading option strategy in which you promise to purchase an asset at an agreed amount. As the price of the underlying asset drops, Put options gains value, the volatility of the underlying securities price rises, and interest rates fall. Movements in the value of the underlying security, the option strike price, time decay, interest rates, and volatility all affect the price of put options.
Bull Call Spread
Generally Spreads are multi-leg techniques in which two or more options are traded. The strategy is to employ two call options to generate a strike price range with a lower and upper strike price. One lengthy call with a price lower and one shorter call with a greater price make up a bull call spread. When a trader bets on a stock's price increasing only little, he or she uses this options strategy. In addition the bullish call spread might help to prevent stock losses while also limiting gains.
Bull Put Spread
As the name suggests the bull put spread is created by using 'Put options' rather than 'Call options' to create a spread. This makes it similar to the Bull Call Spread somewhat similar to Bull Call Spread. An investor conducts a bull put spread by acquiring a put option on a securities and purchasing additional put options for about the same date but at a bigger strike price. The disparity between both the strike prices and the net credit obtained is the maximum loss,
similarly the difference between the premium costs of the two put options is the maximum profit.