Option Strategies

- Option Basics
- Option Intermediate
- Option Strategies

            Straight Calls/Puts
         Covered Calls/Puts
         Vertical/ Credit Spreads
         Straddles
         Strangles
         Butterfly
         Condor
         Collar

Option Trading Tools

Option Trading Systems

Market News

Option Strategies

Now that we have gone through the factors that we know that will affect the price of the option, let us look at some of the strategies that take advantage of various characteristics deriving from the Black Scholes formula.

A short description of each of the strategy is below:

Straight Calls/Puts
Straight option strategies are basically just purchasing or selling a call or a put and hope for the stock to move sufficiently before selling or buying back the option.

Covered Calls/Puts
Covered strategies are used to hedge the movement of the stock that is currently on hand.

Vertical/ Credit Spreads
Credit spreads are strategies that makes use of purchasing a cheaper option and selling a more expensive option of the same nature in anticipation of option expiring useless to gain the premium.

Straddles
Straddles makes use of the simultaneous sale of an in-the-money call and put to take advantage of a volatile market or simultaneous sale of a in-the-money call and put to take advantage of a stationary market.

Strangles
Strangles are much like straddles except that out-of-money call and put are used instead.

Butterfly
Combination of Bull put spread and a Bear Call Spread strategy to limit risks.

Condor
Combination of Bear call Spread and a Bull put Spread strategy to limit risks.

Collar
It is similar to Covered strategies but are uses an out-of-the-money option to protect sudden undesired market movement.

Disclaimer: Option Trading has potential risks and could loose alot of money. Do understand the risks involved before pursuing any trades. Please be aware that our website does NOT recommend any specific stocks or option purchases. Examples used are for educational purposes only. Option Trading Resource is not responsible for stock or options recommendations linked from our sites as we have no control over the sites content. We strive to provide the best information and we do update our site daily.