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Options trading strategies are techniques that options traders use to maximize their profits and minimize their risks of investments.
These strategies can be categorized into three main groups: Bullish, Bearish, and Neutral.
These strategies can be categorized into three main groups: Bullish, Bearish, and Neutral.
Bullish Strategies: In this type of strategy, option traders assume that the market has positive sentiments and it will probably increase in the coming days.
Strategies for Bull Run Market are as follows:
Buying call options: This is a straightforward strategy that involves buying call options on a stock or index that is expected to rise in price. The investor profits if the stock or index rises above the strike price.
Bull call spread: In this strategy, investors buy a call option at a lower strike price and sell a call option at a higher strike price. The investor profits if the stock rises above the strike price of the sold option.
Long call butterfly: In this strategy, the investor buys two call options at a lower strike price and sells two call options at a higher strike price. The investor profits if the stock price remains in a range between the two strike prices.
Bearish Strategies: In this type of strategy, option traders assume that the market has negative sentiments and it will probably fall in the coming days.
Strategies for Bear Market are as follows:
Buying put options: In this strategy, investors buy put options on a stock that is expected to decline in price. The investor profits if the stock falls below the strike price.
Bear put spread: In this strategy, investors buy a put option at a higher strike price and sell a put option at a lower strike price. The investor profits if the stock falls below the strike price of the sold option.
Long put butterfly: In this strategy, the investor buys two put options at a higher strike price and sells two put options at a lower strike price. The investor profits if the stock price remains in a range between the two strike prices.
Neutral Strategies: In this type of strategy, option traders assume that the market has sable sentiments and it will probably consolidate in a particular range in the coming days.
Strategies for Neutral Market Strategies are as follows:
Iron butterfly: In this strategy, investors buy a call option and a put option at the same strike price and selling a call option and a put option at a higher and lower strike price, respectively. The investor profits if the stock price remains in a range between the two strike prices.
Straddle: In this strategy, investors buy a call option and a put option at the same strike price. The investor profits if the stock price moves significantly in either direction.
Strangle: In this strategy, investors buy a call option and a put option at different strike prices. The investor profits if the stock price moves significantly in either direction.
Straddle: In this strategy, investors buy a call option and a put option at the same strike price. The investor profits if the stock price moves significantly in either direction.
Strangle: In this strategy, investors buy a call option and a put option at different strike prices. The investor profits if the stock price moves significantly in either direction.
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