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To understand options trading strategies, one could draw parallels with how the lottery system works. You buy a lottery ticket even when you know the chances of you winning a lottery are not very high. However, if you end up winning the lottery, your fortunes change for the better. Visit MultiBank Group

Similarly, you are aware of the risks involved in trading options. However, you participate in the process with the hope of earning a huge profit. While there is no guarantee of success, having some knowledge of popular option trading strategies would be helpful.

Here are some of the best options trading strategies:

Call Ratio Back Spread

When you want to play it safe, you should opt for the call ratio back spread. This type of trading strategy is used when you go extremely bullish on an index or stock. Traders, who wish to earn profits from growing markets, opt for this method. As a trader, you suffer from the risk of incurring losses when the market remains within a particular range.

Bull Call Spread

When you are exploring the bullish market and looking for successful trading strategies, you must check out the buying one call option, also referred to as the bull call spread. Here, two calls are involved and you must ensure that each of them has the same stock and expiration date. In this particular method, gains are realized only when the price of the underlying stock prices. When the stock prices go for a dip, there is a chance of you suffering from losses.

Ball Put Spread

When option trades are in favor of the underlying asset, bull put spread is a strategy that could be put to use. This method has some similarities to the bull call spread. However, one is purchasing puts instead of calls. When you opt for this approach, you will have to buy 1 OTM put option and then, buy 1 ITM put option. The chances of a trader suffering from a huge loss are minimal with this method. A bull put spread is put together for the net amount one receives.

Strip

The strip is one of those strategies that is considered to be safe by many. Here, you buy one ATM call and two ATM puts. You must remember that it is imperative to invest in these options with the same expiration date and strike price. When it expires, a trader stands a chance to make a profit if the price of the underlying stock moves up or down in a prominent manner. When the prices go down, there is a good chance of making a huge profit.

Long and Short Butterfly

When you are looking for a neutral options strategy that has been designed around restricted rewards and well-defined risks, you should opt for long and short butterflies. In this strategy, the difference between the at-the-money options and the options pertaining to the higher and lower strike prices are the same.

When it comes to a long butterfly call spread, a single ITM call option is bought, two ATM call options are properly written down and one OTM call option is bought. The short butterfly spread strategy, on the other hand, comprises of selling off one in-the-money call option, buying two at-the-money call options and looking for buyers for selling one out-of-the-money call option.

Bear Call Spread

There is a dedicated category called the two-leg bearish market guaranteed options. Under this category, there are two strategies. One of these is the bear call spread. In this particular method, 1 OTM Call option pitched at a higher strike price is bought. 1 ITM Call option pitched at a lower strike price is supposed to be sold off.

As is the case with similarly designed strategies, you must keep in mind that both calls ought to have the same stock and expiration date. When stock prices go down, you can expect a bear call spread to be put together for the net credit. This method, on most occasions, tends to be profitable. The net credit is referred to the maximum possible gain.

Bear Put Spread

As an options trading strategy, a bear put spread has much in common with a bull call spread. This strategy is largely opted for by those who wish to stay away from complexities and want things to be conducted in a simple manner. Traders choose this strategy when they are not too hopeful about the market conditions and are not sure when things will improve.

With the help of the bear put spread method, you can buy the ITM option and sell the OTM option. The stock and expiration date of the two puts should match each other. You must study the principles of this strategy thoroughly before opting for it. Know more multibankfx.com/ar

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