options

When to use: Short Synthetic Option Strategy is used when the investor is bearish on the stock in the near future (i.e. the investor expects the stock to fall in the near future). How it works: In a short synthetic option strategy you sell 1 call option and buy 1 put option of the same underlying stock with the same…

When to use: Call Backspread Option Strategy is used when the investor is bullish on the stock (i.e. the investor expects the price of the stock  to rise in the near future). How it works: Call backspread option strategy uses three option contracts of the same underlying stock, with the same expiry date but two different strike prices.…

When to use: Put Backspread Option Strategy is used when the investor is bearish on the stock (i.e. when the investor expects the stock price to fall in the near future). How it works: In the put backspread strategy the investor sells 1 in-the-money put option; and buys 2 out-of-the-money put options of the same underlying stock with the same…

When to use: Strip Option Strategy is used when the investor is bearish on the stock and expects volatility in the near future. How it works: Strip option strategy use three option contracts of the same underlying stock, with the same expiry date and same strike prices. In this strategy, you buy 2 at-the-money put options and 1 at-the-money call option. For…

When to use: Short Call Ladder Strategy is used when the investor is moderately bullish on the stock and expects significant volatility. How it works: In the short call ladder strategy you sell 1 in-the-money call option; buy 1 at-the-money call option and buy 1 out-of-the-money call option of the same underlying stock with the same expiry date. You believe that the market will be…

When to use: Short Put Ladder Option Strategy is used when the investor is neutral to bullish on the stock and expects significant volatility. How it works: In the short put ladder strategy you sell 1 in-the-money put option; buy 1 at-the-money put option and buy 1 out-of-the-money put option of the same underlying stock with the same expiry date. You believe that the market will…

When to use: Strap option strategy is used when the investor is bullish on the stock and expects volatility in the near future. How it works: Strap option strategy uses three option contracts of the same underlying stock, with the same expiry date and same strike prices. In this strategy, you buy 2 at-the-money call options and 1 at-the-money put option, each…

When to use: Long call condor option strategy is similar to a long call butterfly spread strategy. It is used when the investor believes that the stock is going to trade in a range and will be volatile in the near future. How it works: Long call condor option strategy uses four option contracts of the same underlying stock with the same…

When to use: Short Call Condor Option Strategy is similar to a short call butterfly spread strategy. This Strategy is implemented when the investor believes that the stock is going to break out of a trading range in the near future but is not sure in which direction. How it works: Short call condor strategy uses four option contracts with…

When to use: Long Call Ladder Option Strategy is used when the investor is moderately bullish on the stock and expects less volatility.  This strategy is an extension of the Bull Call Spread Strategy. In this case, the investor sells an additional call option. How it works: In a long call ladder option strategy you buy 1 in-the-money call option; sell 1 at-the-money call option and…

When to use: Long Put Ladder option strategy is used when the investor is moderately bearish on the stock and expects less volatility.  This strategy is an extension of Bear Put Spread Strategy as in that the investor sells another lower strike put. By shorting another put at a lower strike price, the position assumes uncapped risk potential…