In options, you get the choice of buying or selling the underlying asset on the expiry date at a pre-decided price (strike price) of a contract. You have to pay the premium to the seller of the options to get this choice. This can be challenging for new traders and thus crafting strategies beforehand becomes much more crucial. To help you with that, in this article we will explore the seven best option trading strategies.
Best Option Trading Strategies
As options trading involves taking some complicated positions, here are some strategies that you can learn. You can also enroll in the best option trading courses offered by Upsurge.club to get a deeper understanding.
This strategy is used when you see a rise in the prices of the underlying asset. You have to buy one OTM (out-of-the-money) put option and sell one ITM (in-the-money) put option having the same expiry date.
The strike price of the OTM put option should be less than the ITM put option. You will make a profit when the price of the underlying asset rises on the expiry date higher than the strike price of the OTM put.
This strategy is used when you see a fall in prices on the underlying asset. You need to buy one ITM put option and sell one OTM put option having the same expiry date.
The total profit that you can make from this strategy is equal to the difference between the two strike prices and the two premium amounts.
You have to buy one ATM (at-the-money) call option and sell one OTM call option having the same expiry date. The strike price of the ATM call option should be less than the OTM call option.
You will make a profit when the price of the underlying asset rises on the expiry date which is equal to the difference between the two calls strike prices and premium amounts.
You have to buy one OTM call option and sell one ITM call option having the same expiry date. The strike price of the OTM call should be higher than the ITM call option.
You will make a profit when the price of the underlying asset rises on the expiry date which is equal to the difference between the two calls’ premium amounts.
This strategy is used when you expect there will be a rise in prices on the underlying asset and you want to secure yourself from any fall in prices. You have to buy a put option that has the same underlying asset which you are holding.
If the price of the asset rises, then you can make unlimited profits. If the price falls, then you have to face limited losses.
This strategy is used when you expect there will be a fall in prices on the underlying asset. You have to buy a call option that has the same underlying asset which you already have.
If the price of the asset falls, then you can make unlimited profits. Otherwise, you have to face limited losses.
This strategy is used when you see a fall in prices or have a neutral view of the underlying asset. You have to buy one ATM call option and sell two ATM put options having the same strike price and expiry date.
If the price of the asset falls, then you make an unlimited profit otherwise you face a loss of the net premium amount.
There are some of the best option trading strategies that you can use to get leverage in option trading. Slow and steady steps can help you master these strategies. If you wish to learn these strategies in detail, you can opt for an option trading course on Upsurge.club and kickstart your journey.