Abstract
Option trading strategies may be of four types bullish, bearish, neutral and volatile. Depending on the requirements, the strategies are applied. Options trading offer more opportunities for earning profits.
Options trading strategies may also be referred to as strategies related to options based investments. The strategies comprise certain calculated methods and procedures by, which the traders are able to get the maximum returns. The options may be traded either independently or in combination with other option trading instruments. In a nutshell, the strategies are so worked out to extend the maximum benefits to the investing individuals from the movement of stock price in the market. The potentiality for profit in options trading system is more as compared to the trading of stocks in the conventional manner. Selecting appropriate option trading strategies determine the success of a trade.
Functions of option trading strategies:
The strategies pertaining to option trading allows an individual to protect the investment portfolio of traders even when market conditions may not be good. Option trading strategies give innumerable options to the traders for earning profits. It increases the probability of earning profits.
Categories of option trading strategies:
Four types of option trading strategies are recognized. They are:
Neutral strategies
Neutral strategies are opted for when it is fathomed that the stock is likely to remain static for sometime. Under these circumstances employing any one of the several neutral strategies may answer the problem.
Bullish strategies
Bullish strategies are employed when it is anticipated that the price of stocks will be escalating.
Bearish strategies
A trader may apply bearish strategies if he anticipates that the market will be dropping.
Volatile strategies
Volatile option strategies are used when one expects that the market may either drop drastically or conversely, the market may rise drastically.
Position trading:
In the event when options are used in combination instead of being used independently, they are referred to as position trading.
Nature of option trading strategies:
Option trading strategies may be either straightforward, which can be followed by everyone. It may also be complex, which requires an investor to be well versed about the logistics of executing them.
