PostHeaderIcon Option Trading Strategies

Option trading may not be quite common among most traders, but it also holds on to its own advantages. While others may choose trading stocks mainly because it is more popular, trading in options may add another dimension to an avid trader’s portfolio. And there are certain strategies that may be used to be successful at it.

Varsatile Options

One of the main advantages of options trading is their versatility. They allow traders to adjust their position according to any situation that may present in the market. Options traders can either be speculative or go the conservative way and still be successful. But just like any other trading markets, options also come with its own risk. That is why option traders also need to follow a certain trading strategy in order to profit from it. And there are various strategies that option traders may employ.

Bullish Option Strategy

Such a strategy may be used when an option trader expects the underlying price of a certain commodity or asset is about to move upwards. One of the most bullish of option trading strategies is the simple call option . Also called the “long call”, this option trading strategy involves buying a call (a financial contract between a buyer and a seller) for the right to buy a stated quantity of a stock or a financial asset at a certain time and at a certain price. This is most profitable if the buyer expects the price of the asset or security to go upwards.

Bearish Option Strategy

A bearish option strategy is employed when the trader expects the price of a certain option to go down. A usual strategy being used in such an instance is the bear call spread. This limited profit and limited risk trading strategy involves buying a call option with a higher price and a lower premium and then selling a call option with a lower price but a higher premium. The trader profits in this situation just as long as the price of the underlying security remains the same at the expiration of the call or continues going downwards.


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