Option Strategies

Options strategy. Most Successful Options Strategies to Deploy Right Now • Benzinga

Option buyers are charged an amount called a "premium" by the sellers for such a right.

options strategy

In contrast, option sellers option writers assume greater risk than the option options strategy, which is why they demand this premium. Options are divided into "call" and "put" options.

options strategy

There are some advantages to options strategy options. The following are basic option strategies for beginners.

options strategy

Potential profit is unlimited, as the option payoff will increase along with the underlying asset price until expiration, and there is theoretically no limit to how high it can go. With a put option, if the underlying rises past the option's strike price, the option will simply expire worthlessly.

In exchange for this risk, a covered call strategy provides limited downside protection in the form of premium received when selling the call option.

Bullish strategies[ edit ] Bullish options strategies are employed when the options trader expects the underlying stock price to move upwards. The trader may also forecast how high the stock price may go and the time frame in which the rally may occur in order to select the optimum trading strategy for buying a bullish option. The most bullish of options trading strategies, used by most options traders, is simply buying a call option.

A protective put is a long put, like the strategy we discussed above; however, the goal, as the name implies, is downside protection versus attempting to profit from a downside move. If a trader owns shares that he or she is bullish on in the long run but wants to protect against a decline in the short run, they may purchase a protective put.

options strategy

Hence, the position can effectively be thought of as an insurance strategy. The trader can set the strike price below the current price to reduce premium payment at the expense of decreasing downside protection.

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This can be thought of as deductible insurance. The following put options are available: June options.

options strategy