Options Trading Strategies Made Simple

Options trading provide one more security as it limits the possible losses one might acquire. One could also apply different strategies to optimize ones gains in an options trade. In a bullish market for instance, a stock is expected to increase in value one can opt for a call option as the value of the option increases as the value of the stock increases. Also, in a bearish market a stock is expected to decrease in value one can opt for a put option where the value of the put increases as the value of the stock decreases.

There are also strategies one can employ when one doesn't know whether the value of the underlying stock will increase or decrease. These strategies don't depend on the rise or fall of the value of the stock but rather depend on the volatility of the underlying stock.

Types of neutral strategies that one can employ are Guts, Butterfly, Condor, Straddle, Strangle, and Risk Reversal. All of which use call and put options and needs the underlying stock to achieve certain conditions for the trader to optimize one's gains.