List of options trading strategies

A - Z List of Trading Strategies.

Below you will find a simple alphabetical list of all the options trading strategies that we cover on this site. If you are looking for further details on a specific strategy then simply scroll down to that one and click on the relevant link. We have also provided a very brief description of each one.

Albatross Spread: An advanced neutral trading strategy.

Bear Butterfly Spread: A complex bearish trading strategy.

Bear Call Spread: A bearish trading strategy that requires a high trading level.

Bear Put Ladder Spread: A complex bearish trading strategy.

Bear Put Spread: A bearish trading strategy that is suitable for beginners.

Bear Ratio Spread: A complex bearish trading strategy.

Box Spread, Conversion & Reversal Arbitrage and Strike Arbitrage: See Options Arbitrage Strategies.

Bull Butterfly Spread: A complex bullish trading strategy.

Bull Call Ladder Spread: A complex bullish trading strategy.

Bull Call Spread: A bullish trading strategy that is suitable for beginners.

Bull Condor Spread: A complex bullish trading strategy.

Bull Put Spread: A bullish trading strategy that requires a high trading level.

Bull Ratio Spread: A complex bullish trading strategy.

Butterfly Spread: An advanced neutral trading strategy.

Buy Call Options: See Long Call.

Buy Put Options: See Long Put.

Calendar Call Spread: A simple neutral trading strategy.

Calendar Put Spread: A simple neutral trading strategy.

Calendar Straddle: An advanced neutral trading strategy.

Calendar Strangle: An advanced neutral trading strategy.

Call Ratio Backspread: A fairly complicated volatile trading strategy that leans towards bullish.

Call Ratio Spread: An advanced neutral trading strategy.

Condor Spread: An advanced neutral trading strategy.

Covered Call Collar: A fairly simple neutral trading strategy that is suitable for beginners.

Covered Call: A relatively simple neutral trading strategy that is suitable for beginners.

Covered Put: A fairly complex neutral trading strategy.

Iron Albatross Spread: An advanced neutral trading strategy.

Iron Butterfly Spread: An advanced neutral trading strategy.

Iron Condor Spread: An advanced neutral trading strategy.

Long Call: A single transaction bullish trading strategy. Suitable for beginners.

Long Gut: A simple volatile trading strategy suitable beginners.

Long Put: A single transaction bearish trading strategy that is suitable for beginners.

Long Straddle: A simple volatile trading strategy suitable for beginners.

Long Strangle: A simple volatile trading strategy suitable for beginners.

Naked Call Write: See Short Call.

Naked Put Write: See Short Put.

Put Ratio Backspread: A reasonably complex volatile trading strategy that leans towards bearish.

Put Ratio Spread: An advanced neutral trading strategy.

Reverse Iron Condor Spread: An advanced volatile trading strategy.

Short Albatross Spread: A complex volatile trading strategy.

Short Bear Ratio Spread: A fairly complicated bearish trading strategy.

Short Bull Ratio Spread: A fairly complicated bullish trading strategy.

Short Butterfly Spread: A complicated volatile trading strategy.

Short Calendar Call Spread: An advanced volatile trading strategy.

Short Call: A single transaction bearish trading strategy.

Short Condor Spread: An advanced volatile trading strategy.

Short Gut: A simple neutral trading strategy.

Short Put: A single transaction bullish trading strategy.

Short Straddle: A relatively simple neutral trading strategy.

Short Strangle: A quite straightforward neutral trading strategy.

Strap Straddle: A simple volatile trading strategy suitable for beginners.

Strap Strangle: A simple volatile trading strategy suitable for beginners.

Strip Straddle: A simple volatile trading strategy suitable for beginners.

Strip Strangle: A simple volatile trading strategy suitable for beginners.

Synthetic Covered Call, Short Straddle, and Straddle: See Synthetic Options Strategies.

10 Options Strategies to Know.

10 Options Strategies To Know.

Too often, traders jump into the options game with little or no understanding of how many options strategies are available to limit their risk and maximize return. With a little bit of effort, however, traders can learn how to take advantage of the flexibility and full power of options as a trading vehicle. With this in mind, we've put together this slide show, which we hope will shorten the learning curve and point you in the right direction.

10 Options Strategies To Know.

Too often, traders jump into the options game with little or no understanding of how many options strategies are available to limit their risk and maximize return. With a little bit of effort, however, traders can learn how to take advantage of the flexibility and full power of options as a trading vehicle. With this in mind, we've put together this slide show, which we hope will shorten the learning curve and point you in the right direction.

1. Covered Call.

Aside from purchasing a naked call option, you can also engage in a basic covered call or buy-write strategy. In this strategy, you would purchase the assets outright, and simultaneously write (or sell) a call option on those same assets. Your volume of assets owned should be equivalent to the number of assets underlying the call option. Investors will often use this position when they have a short-term position and a neutral opinion on the assets, and are looking to generate additional profits (through receipt of the call premium), or protect against a potential decline in the underlying asset's value. (For more insight, read Covered Call Strategies For A Falling Market.)

2. Married Put.

In a married put strategy, an investor who purchases (or currently owns) a particular asset (such as shares), simultaneously purchases a put option for an equivalent number of shares. Investors will use this strategy when they are bullish on the asset's price and wish to protect themselves against potential short-term losses. This strategy essentially functions like an insurance policy, and establishes a floor should the asset's price plunge dramatically. (For more on using this strategy, see Married Puts: A Protective Relationship . )

3. Bull Call Spread.

In a bull call spread strategy, an investor will simultaneously buy call options at a specific strike price and sell the same number of calls at a higher strike price. Both call options will have the same expiration month and underlying asset. This type of vertical spread strategy is often used when an investor is bullish and expects a moderate rise in the price of the underlying asset. (To learn more, read Vertical Bull and Bear Credit Spreads.)

4. Bear Put Spread.

The bear put spread strategy is another form of vertical spread​ like the bull call spread. In this strategy, the investor will simultaneously purchase put options at a specific strike price and sell the same number of puts at a lower strike price. Both options would be for the same underlying asset and have the same expiration date. This method is used when the trader is bearish and expects the underlying asset's price to decline. It offers both limited gains and limited losses. (For more on this strategy, read Bear Put Spreads: A Roaring Alternative To Short Selling.)

Investopedia Academy "Options for Beginners"

Now that you've learned a few different options strategies, if you're ready to take the next step and learn to:

Improve flexibility in your portfolio by adding options Approach Calls as down-payments, and Puts as insurance Interpret expiration dates, and distinguish intrinsic value from time value Calculate breakevens and risk management Explore advanced concepts such as spreads, straddles, and strangles.

5. Protective Collar.

A protective collar strategy is performed by purchasing an out-of-the-money put option and writing an out-of-the-money call option at the same time, for the same underlying asset (such as shares). This strategy is often used by investors after a long position in a stock has experienced substantial gains. In this way, investors can lock in profits without selling their shares. (For more on these types of strategies, see Don't Forget Your Protective Collar and How a Protective Collar Works.)

6. Long Straddle.

A long straddle options strategy is when an investor purchases both a call and put option with the same strike price, underlying asset and expiration date simultaneously. An investor will often use this strategy when he or she believes the price of the underlying asset will move significantly, but is unsure of which direction the move will take. This strategy allows the investor to maintain unlimited gains, while the loss is limited to the cost of both options contracts. (For more, read Straddle Strategy A Simple Approach To Market Neutral . )

7. Long Strangle.

In a long strangle options strategy, the investor purchases a call and put option with the same maturity and underlying asset, but with different strike prices. The put strike price will typically be below the strike price of the call option, and both options will be out of the money. An investor who uses this strategy believes the underlying asset's price will experience a large movement, but is unsure of which direction the move will take. Losses are limited to the costs of both options; strangles will typically be less expensive than straddles because the options are purchased out of the money. (For more, see Get A Strong Hold On Profit With Strangles.)

8. Butterfly Spread.

All the strategies up to this point have required a combination of two different positions or contracts. In a butterfly spread options strategy, an investor will combine both a bull spread strategy and a bear spread strategy, and use three different strike prices. For example, one type of butterfly spread involves purchasing one call (put) option at the lowest (highest) strike price, while selling two call (put) options at a higher (lower) strike price, and then one last call (put) option at an even higher (lower) strike price. (For more on this strategy, read Setting Profit Traps With Butterfly Spreads . )

9. Iron Condor.

An even more interesting strategy is the iron condor. In this strategy, the investor simultaneously holds a long and short position in two different strangle strategies. The iron condor is a fairly complex strategy that definitely requires time to learn, and practice to master. (We recommend reading more about this strategy in Take Flight With An Iron Condor, Should You Flock To Iron Condors? and try the strategy for yourself (risk-free!) using the Investopedia Simulator.)

10. Iron Butterfly.

The final options strategy we will demonstrate here is the iron butterfly. In this strategy, an investor will combine either a long or short straddle with the simultaneous purchase or sale of a strangle. Although similar to a butterfly spread, this strategy differs because it uses both calls and puts, as opposed to one or the other. Profit and loss are both limited within a specific range, depending on the strike prices of the options used. Investors will often use out-of-the-money options in an effort to cut costs while limiting risk. (To learn more, read What is an Iron Butterfly Option Strategy?)

6 Great Option Strategies For Beginners.

Option rookies are often eager to begin trading – too eager. It’s important to get a solid foundation to be certain you understand how options work and how they can help you achieve your goals – before trading.

Here’s a list of my favorite methods. Note: this list contains strategies that are easy to learn and understand. Each is less risky than owning stock. Most involve limited risk. For investors not familiar with options lingo read our beginners options terms and intermediate options terms posts.

1. Covered call writing. Using stock you already own (or buy new shares), you sell someone else a call option that grants the buyer the right to buy your stock at a specified price. That limits profit potential. You collect a cash premium that is yours to keep, no matter what else happens. That cash reduces your cost. Thus, if the stock declines in price, you may incur a loss, but you are better off than if you simply owned the shares.

Example: Buy 100 shares of IBM.

Sell one IBM Jan 110 call.

2. Cash-secured naked put writing. Sell a put option on a stock you want to own, choosing a strike price that represents the price you are willing to pay for stock. You collect a cash premium in return for accepting an obligation to buy stock by paying the strike price. You may not buy the stock, but if you don’t, you keep the premium as a consolation prize. If you maintain enough cash in your brokerage account to buy the shares (if the put owner exercises the put), then you are considered to be ‘cash-secured.’

Example: Sell one AMZN Jul 50 put; maintain $5,000 in account.

3. Collar. A collar is a covered call position, with the addition of a put. The put acts as an insurance policy and limit losses to a minimal (but adjustable) amount. Profits are also limited, but conservative investors find that it’s a good trade-off to limit profits in return for limited losses.

Example: Buy 100 shares of IBM.

Sell one IBM Jan 110 call.

Buy one IBM Jan 95 put.

4. Credit spread. The purchase of one call option, and the sale of another. Or the purchase of one put option, and the sale of another. Both options have the same expiration. It’s called a credit spread because the investor collects cash for the trade. Thus, the higher priced option is sold, and a less expensive, further out of the money option is bought. This strategy has a market bias (call spread is bearish and put spread is bullish) with limited profits and limited losses.

Example: Buy 5 JNJ Jul 60 calls.

Sell 5 JNJ Jul 55 calls.

or Buy 5 SPY Apr 78 puts.

Sell 5 SPY Apr 80 puts.

5. Iron condor. A position that consists of one call credit spread and one put credit spread. Again, gains and losses are limited.

Example: Buy 2 SPX May 880 calls.

Sell 2 SPX May 860 calls.

and Buy 2 SPX May 740 puts.

Sell 2 SPX May 760 puts.

6. Diagonal (or double diagonal) spread. These are spreads in which the options have different strike prices and different expiration dates.

1. The option bought expires later than the option sold.

2. The option bought is further out of the money than the option sold.

Example: Buy 7 XOM Nov 80 calls.

Sell 7 XOM Oct 75 calls This is a diagonal spread.

Or Buy 7 XOM Nov 60 puts.

Sell 7 XOM Oct 65 puts This is a diagonal spread.

If you own both positions at the same time, it’s a double diagonal spread.

Note that buying calls and/or puts is NOT on this list , despite the fact that the majority of rookies begin their option trading careers by adopting that strategy. True, it’s fun to buy an option and treat it as a mini-lottery ticket. But, that’s gambling. The likelihood of consistently making money when buying options is small, and I cannot recommend that strategy.

Mark Wolfinger is a 20 year CBOE options veteran and is the writer for the blog Options for Rookies Premium. He also is the author of the book, The Rookie’s Guide to Options.

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The Best Options Trading Strategy.

The best options trading strategies are used primarily for speculative and hedging purposes. A virtually unlimited number of strategies can be created by incorporating various option positions resulting in a strategy designed to accomplish a specific goal. The goal may be to protect currently held assets or to speculate on the anticipated price movement of an underlying financial instrument. The investor can select from the most commonly used strategies or create a custom strategy. The best trading strategy is the one that will accomplish the financial goal of the investor.

Hedging can be a form of insurance on an asset or portfolio. The investor who owns shares of a company may want to protect the investment against an adverse price change. Buying a put is a strategy that offers the trader the right to sell the stock at a specified strike price on or before the expiration date of the option contract. The strike price is the exercise price of the contract and is selected by the trader. Index options cover a broad range of stocks and can be used to hedge a portfolio of stocks. The investor owning shares in energy related stocks may want to protect the investment by purchasing a put on an energy index. If the value of the portfolio declines, the value of the put option will typically increase, creating a hedge.

Speculation.

The investor anticipating an increase in the value of a stock can buy a call option to capitalize on the move. A long call offers the investor the right to buy an asset at the strike price on or before expiration of the option contract. A call will typically increase in value as the underlying stock increases in value. Buying a call is much less expensive than buying the stock, and the risk is limited to the premium paid for the call. Speculating on a decline in the value of an asset can be accomplished by buying a put option. Once again, the risk is limited to the premium paid and the trade is far less expensive than short selling the stock. The investor expecting a general market movement can speculate using index options.

Combinations.

Complex option strategies are used for a variety of trading opportunities. Options can be bought and sold with different strike prices and expiration dates, creating limited risk strategies. These methods enable the investor to capitalize on market conditions that could not be traded using simple long and short stock positions.

Market Strategies.

Some option strategies are used to trade specific market conditions such as a trending, choppy or consolidating market. Trading a volatile or erratic market is typically accomplished using complex option strategies. Market-neutral positions can be established that lower the exposure to unexpected volatility. Option trading strategies are available for nearly every type of market condition.

References.

About the Author.

Dana DeCecco has been writing for Lakeside Venture Capital for three years and has has maintained financial websites since 1998. Holding a Series 3 license, DeCecco is a former commodity trading adviser with an extensive knowledge of trading financial markets. He studied business at Penn State University.

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