Options Trading
Options trading is a popular form of derivatives trading that involves the buying and selling of options contracts. Here are some of the different types of options trading strategies:
- Long Call: This strategy involves buying a call option, which gives the buyer the right to purchase the underlying asset at a predetermined price within a specific time frame.
- Long Put: This strategy involves buying a put option, which gives the buyer the right to sell the underlying asset at a predetermined price within a specific time frame.
- Covered Call: This strategy involves buying an underlying asset and selling a call option on that asset, thereby generating income from the premium received on the call option.
- Protective Put: This strategy involves buying an underlying asset and buying a put option on that asset, thereby protecting the investor from potential losses if the price of the asset falls.
- Bull Call Spread: This strategy involves buying a call option at a lower strike price and selling a call option at a higher strike price, thereby limiting the potential loss while allowing for potential profits if the underlying asset price rises.
- Bear Put Spread: This strategy involves buying a put option at a higher strike price and selling a put option at a lower strike price, thereby limiting the potential loss while allowing for potential profits if the underlying asset price falls.
- Straddle: This strategy involves buying both a call and a put option at the same strike price, thereby allowing the investor to profit from any significant price movements in either direction.
- Strangle: This strategy involves buying both a call and a put option at different strike prices, thereby allowing the investor to profit from any significant price movements in either direction, while limiting potential losses.
- Iron Butterfly: This strategy involves buying a call option and a put option at the same strike price, and also selling a call option and a put option at different strike prices, thereby limiting potential losses while allowing for potential profits if the underlying asset price stays within a certain range.