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Option Trading Strategies

The document discusses bullish, bearish, and neutral options trading strategies, when each would be employed based on the expected direction of the underlying stock price, advantages like limiting losses and generating profit, and disadvantages like limited profit potential and requiring extra time and effort.

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Amitoj singh
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71 views23 pages

Option Trading Strategies

The document discusses bullish, bearish, and neutral options trading strategies, when each would be employed based on the expected direction of the underlying stock price, advantages like limiting losses and generating profit, and disadvantages like limited profit potential and requiring extra time and effort.

Uploaded by

Amitoj singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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OPTION STRATEGIES

 Bullish strategies in options trading are employed when the options


trader expects the underlying stock price to move upwards.
Bearish strategies in options trading are employed when
the options trader expects the underlying stock price to
move downwards.

WHY USE BEARISH STRATEGIES?


•Limiting lose
• Negative effects of time decay.
• Generate profit.

 DISADVANTAGES:
• Limited profit potential
• Number of different strategies
• Takes extra time and effort to decide best one for any situation.
 Neutral options trading strategies are employed when the
options trader does not know whether the underlying
stock price will rise or fall.

 WHY USE NEUTRAL STRATEGIES?


• The biggest advantage is that they exist.
• Profit from three different outcomes.
• Prolonged periods of being neutral, gives options traders
chances to generate returns
• Can turn time decay into positive
• Can control your risk exposure to some extent.

 DISADVANTAGES: The biggest drawback is that the


potential profits of these is always limited, also the
strategies all require at least two transactions.

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