Option Trading Strategy

Top 5 Options Trading Strategies

noreply@blogger.com (Option Trading Strategy) — Sat, 29 Nov 2008 17:00:00 +0000

Top 5 options trading strategies:

These five option trading strategies are my favorite for two reasons:

simple option trading strategy
little options broker commission
limited investing risk

Online Options Trading tips:

focus on one option trading strategy

What is your favorite option trading strategy?

Happy trading and keep it simple,

Option Trading Strategy

Put Ratio Backspread Strategy

noreply@blogger.com (Option Trading Strategy) — Thu, 15 May 2008 14:00:00 +0000

Put Ratio Backspread strategy is the opposite of Call Ratio Backspread strategy.
Put Ratio Backspread strategy in Online Options Trading :

put : put options
ratio : different in number of contract
back : the opposite of ordinary spread
spread : use one type of option contract
Put Ratio Backspread : an option trading strategy in Online Options Trading to sell higher strike price put options and buy lower strike put options with a greater number.

How to tell the Options Broker :

sell to open higher strike price put options
buy to open lower strike price put options

Profit and loss in Put Ratio Backspread option strategy :

profit : unlimited
loss : limited

caution : be careful when deciding the ratio of put options contract.

Online Options Trading http://onlineoptionstrading.blogspot.com/

Call Ratio Backspread Option Strategy

noreply@blogger.com (Option Trading Strategy) — Wed, 14 May 2008 14:00:00 +0000

Call Ratio Backspread strategy is the alternative strategy for Call Ratio Spread strategy.

Call Ratio Backspread in Online Options Trading :

call : call options
ratio : different in number
back : the opposite of ordinary spread
spread : involves one type of option contract
call ratio backspread : a strategy in Online Options Trading to sell lower strike price call options and buy higher strike price call option in a greater number with the same expiration date.

How to tell the Options Broker :

sell to open call options with lower strike price
buy to open call options with higher strike price

Profit and loss in Call Ratio Backspread :

profit : unlimited
loss : limited

When to use Call Ratio Backspread :

if you expect the stock price is below the lower strike price ( net credit premium )
if you expect the stock price goes up beyond the higher strike price

Investing Tool at http://investingtool.blogspot.com/

Put Ratio Spread Strategy in Option Trading

noreply@blogger.com (Option Trading Strategy) — Tue, 13 May 2008 14:00:00 +0000

After Call Ratio Spread option strategy, the next option strategy is Put Ratio Spread strategy.

What is Put Ratio Spread :

put : put options
ratio : different number of option contracts
spread : one type of options
put ratio spread : an option trading strategy in Online Options Trading to buy higher strike put options and sell lower strike put options with greater number

Steps to order Put Ratio Spread to Options Broker :

buy to open put options with higher strike price
sell to open put options with lower strike price

Profit and loss in Put Ratio Spread :

profit : higher strike price - lower strike price + net premium
loss : unlimited

caution : consider the options broker commission.

Investment Tool at http://investmenttool.blogspot.com/

Call Ratio Spread in Option Trading

noreply@blogger.com (Option Trading Strategy) — Mon, 12 May 2008 14:00:00 +0000

After Short Strangle option strategy, next strategy is Call Ratio Spread strategy.

What is Call Ratio Spread :

call : call options
ratio : different quantity
spread : same type of options
call ratio spread : an option trading strategy in online options trading to buy lower strike call options and sell greater number of higher strike call options

Steps to order Call Ratio Spread :

buy to open call options with lower strike price
buy to open call options with higher strike price

Profit and loss in Call Ratio Spread :

profit = higher strike price - lower strike price + net call option premium
loss = unlimited

When to use Call Ratio Spread :

expect the stock price is lower than the lower strike price ( net credit premium )
expect the stock price would stay within the range between the strike prices ( net debit premium )

Online Options Trading at http://onlineoptionstrading.blogspot.com/

FAQs in Short Strangle Option Strategy

noreply@blogger.com (Option Trading Strategy) — Sun, 11 May 2008 14:00:00 +0000

Short Strangle Option Strategy is different from Long Strangle strategy.

What is short strangle in online options trading :

short : sell
strangle : OTM call options and put options
short strangle : an option trading strategy in Online Options Trading that sell OTM call options and OTM put options with the same expiration date

Steps to order short strangle in online options trading :

sell to open call options
sell to open put options

Pro and contra in short strangle as option trading strategy :

pro : time decay benefits option traders
contra : profit is limited and loss is unlimited

When to use short strangle in online options trading :

use short strangle in stocks with high volatility that will decrease its volatility

Use Options as Invest Tool at http://investtool.blogspot.com/

Long Strangle in Option Trading Strategy

noreply@blogger.com (Option Trading Strategy) — Sat, 10 May 2008 14:00:00 +0000

Long Strangle strategy will be our next option trading strategy after Short Straddle strategy.

What is Long Strangle in Online Options Trading :

long : buy
strangle : OTM call and put options
OTM : out of the money
long strangle : a strategy in Online Options Trading that buys OTM call options and OTM put options with the same expiration date at the same time

Steps to order long strangle in Online Options Trading :

buy to open call options
buy to open put options

Pro and Contra in long strangle in Online Options Trading :

pro : profit is unlimited, loss is limited
contra : time decay again ts option trader

When to use long strangle in Online Options Trading :

a low volatility market that is ready to have high volatility

Options Broker at http://optionsbroker.blogspot.com/.

Short Straddle - Option Trading Strategy

noreply@blogger.com (Option Trading Strategy) — Fri, 09 May 2008 14:00:00 +0000

Short Straddle Strategy is the opposite of Long Straddle Strategy.

what is Short Straddle in Online Options Trading ?

short : sell
straddle : ATM call and put options
short straddle : an option trading strategy in Online Options Trading that sells ATM call options and sells ATM put options at the same time with the same strike price and expiration date

Steps to order short straddle in Online Options Trading ?

sell to open call options
sell to open put options

Pro and Contra in short straddle ?

pro : get the premiums in advance, time decay benefits us
contra : loss is unlimited, profit is limited

When to use short straddle in Online Options Trading ?

a high volatility market that you expect the volatility would decrease, so you sell at high and buy at low volatility

Futures Options Brokers at http://futuresoptionsbrokers.blogspot.com/

Long Straddle in Online Options Trading

noreply@blogger.com (Option Trading Strategy) — Tue, 15 Apr 2008 15:45:00 +0000

Long Straddle Strategy is the next option trading strategy after Bear Put Vertical Spread strategy.

What is long straddle in Online Options Trading ?

long : buy
straddle : both ATM options
ATM : at the money
definition : long straddle is an Online Options Trading strategy that buy ATM call options and ATM put options with the same strike price and expiration date

Steps to order long straddle :

buy to open atm call options
buy to open atm put options

Pro and Contra in long straddle :

pro : profit is unlimited, loss is limited, win either market goes up or down
contra : purchase price is high and time decay against option traders

Perfect time for long Straddle in Online Options Trading :

a low volatility market that you expect to have a sharp increase in volatility

Investor Tool http://investortool.blogspot.com/

Bear Put Vertical Spread in Option Trading Strategy

noreply@blogger.com (Option Trading Strategy) — Mon, 07 Apr 2008 16:00:00 +0000

If there is Bear Call Vertical Spread strategy, there is also Bear Put Vertical Spread strategy.

What is Bear Put Vertical Spread ?

bear : down market
put : put options
vertical spread : higher and lower strike price
conclusion : Bear Put Vertical Spread is a strategy in Online Options Trading that buy put options with a higher strike price and sell put options with a lower strike price

Steps to order bear put vertical spread ?

buy to open put options at higher strike price
sell to open put options at lower strike price

What is the positive and negative of bear put vertical spread ?

positive : loss is limited
negative : profit is also limited and cheaper than buy put options

When to do bear put vertical spread ?

when you think the market would be a moderately bearish market and the stock price would go down

How to calculate the maximum profit , loss and BEP ?

maximum profit = ( higher strike price - lower strike price ) - net debit premium
maximum loss = net debit premium = higher strike price premium - lower strike premium
BEP = higher strike price - net debit premium

Online Options Trading = http://onlineoptionstrading.blogspot.com/.

Online Options Trading Strategy : Bear Call Vertical Spread

noreply@blogger.com (Option Trading Strategy) — Tue, 05 Feb 2008 07:22:00 +0000

Bear Call Vertical Spread Strategy is the next option trading strategy after discussing about Bull Put Vertical Spread Strategy.

Definition of Bear Call Vertical Spread Strategy :

bear : down market
call : call options
vertical spread : higher and lower strike price
Bear Call Vertical Spread is a strategy in online options trading that buys call options at higher strike price and sells call options at lower strike price

Characteristics of Bear Call Vertical Spread Strategy :

order : buy to open call options at higher strike price and sell to open call options at lower strike price
positive : loss is limited, we can keep the premiums
negative : profit is limited
market outlook : look for a moderately bearish market, expect the stock price below the lower strike price ( down market )
profits : net credit call option premium
loss : ( higher strike price - lower strike price ) - net credit call options premium
bep : lower strike price + net credit call options premium
caution : please consider the ratio of profits and losses and the chance of winning

http://futuresoptionsbrokers.blogspot.com/.

Bull Put Vertical Spread in Online Options Trading

noreply@blogger.com (Option Trading Strategy) — Wed, 23 Jan 2008 01:54:00 +0000

Bull Put Vertical Spread Strategy is the opposite of Bull Call Vertical Spread Strategy.

Characteristics of Bull Put Vertical Spread Strategy :

Bull Put Vertical Spread is a strategy in Online Options Trading that buy put options at a lower strike price and at the same time sell put options at higher strike price
order : buy to open put options at a lower strike price and sell to open put options at higher strike price
positive : loss is limited, we can collect the premium first
negative : profit is limited, max profit is smaller than max loss
market outlook : moderately bullish market, expect the stock price would close above the higher strike price
profits = premium of higher strike price put options - premium of lower strike price put options
loss = ( higher strike price - lower strike price ) - net credit premium
bep = higher strike price - net credit premium received
caution : please watch the probability of winning, because the return is lower than the risk

Please remember there is no bullet proof strategy, we must learn all option strategy in Online Options Trading.

Bull Call Vertical Spread in Online Options Trading

noreply@blogger.com (Option Trading Strategy) — Thu, 17 Jan 2008 14:54:00 +0000

Bull Call Vertical Spread is different from Covered Put and Covered Call strategy.

Characteristics of Bull Call Vertical Spread :

Bull Call Vertical Spread is a strategy in Online Options Trading that buy call options at a lower strike price and sell call options at a higher strike price
order : buy to open call options at a lower strike price and sell to open call options at a higher strike price
positive : cheaper than buy call options, limited loss
negative : limited profit
market outlook : a moderately bullish market. We expect the stock price would go up but not exceed the higher strike price
profits = ( higher strike price - lower strike price ) - ( lower strike call options premium - higher strike price call option premium )
loss = net debit premium paid
bep = lower strike price - net debit premium paid

Invest Tool at http://investtool.blogspot.com/.

Covered Put in Online Options Trading

noreply@blogger.com (Option Trading Strategy) — Mon, 14 Jan 2008 07:15:00 +0000

Covered Put Strategy is the opposite of Covered Call strategy in Online Options Trading.

Covered Put Strategy 's characteristics :

covered put is the opposite of covered call. Covered Put is a strategy in Online Options Trading that sell the stocks and sell the put options.
order : sell to open stocks and sell to open put options
positive : time decay benefits the trader
negative : the loss is unlimited and the profit is limited
market outlook : slightly bearish to neutral
profits = put option premium + ( selling price of the stocks - put option strike price )
loss = unlimited
bep = price of the stock + put option premium
caution : like covered call, covered put strategy doesn't suit with high volatility stocks. Covered put is more dangerous than covered call because the limit of stock price to go up is the sky ( not like covered call, the limit is zero )

Online Options Trading at http://onlineoptionstrading.blogspot.com/.

Covered call in Online Options Trading

noreply@blogger.com (Option Trading Strategy) — Thu, 10 Jan 2008 07:38:00 +0000

Covered Call strategy also known as Writing Covered Call strategy is more complicated but safer than short naked call options strategy.

Covered Call Strategy 's characteristics :

covered call / writing covered call is a strategy in Online Options Trading that buy stocks and sell call options at the same time.
order : buy to open stock and sell to open call option
positive : can buy stocks at discount, time decay benefits the buyer, can get monthly income
negative : loss is unlimited and profit is limited
market outlook : slightly bullish to neutral
profits : call option premium + ( strike price of the call option - stock 's purchase price )
loss : unlimited until the stock price goes to zero
bep = stock price - call option premium
caution : not suitable for high volatility stocks such as biotech stocks.

Writing Covered Call at http://writingcoveredcall.blogspot.com/

Sell Put Options Strategy

noreply@blogger.com (Option Trading Strategy) — Tue, 18 Dec 2007 15:19:00 +0000

Sell Put Options strategy is the opposite of Buy Put Options Strategy.

Sell Put Options strategy 's characteristics:

Sell Put Options is a strategy in online options trading that sell the put options first and then buy them later.
order : sell to open put options
positive : time decay give advantage to the seller
negative : limited profits, unlimited risk ( until the stock price goes to zero )
market outlook : bullish or expect the stock price goes up so we want the put options expire worthless and keep the premium
profits = put options premium
loss = unlimited
BEP = put option strike price + put option premium
cautions : this strategy usually used in good stocks, the good stocks price usually is high, so although the winning probability is high but the risk is also high. So for individual traders , don't do it !

Futures Options Brokers at http://futuresoptionsbrokers.blogspot.com/.

Buy Put Option in Online Options Trading

noreply@blogger.com (Option Trading Strategy) — Fri, 14 Dec 2007 00:37:00 +0000

Buy Put Options strategy is similar to Buy Call Options strategy but has different direction.

Buy Put Options strategy 's characteristics :

Buy put strategy : strategy in online options trading to buy put options
order : buy to open put options
positive : unlimited profits and limited loss
negative : the time decay against the buyer
market outlook : bearish market or expect the stock price would decline
profit : strike price - stock price - put option premium
loss : put option premium
bep : put option strike price - put option premium

More info about Option Trading is in Online Options Trading

Short Naked Call Option

noreply@blogger.com (Option Trading Strategy) — Sun, 09 Dec 2007 07:01:00 +0000

Short Naked Call Option is a high risk option trading strategy.

Short Naked Call Options strategy's Characteristics:

Short Naked Call Options is a strategy in online options trading that sell the call options first then buy them later to cover the position.
Order : Sell to open call options
Positive : time decay benefit the seller
Negative : limited profit and unlimited loss
Market outlook : bearish or expect the stock market to go down, so the call options expire worthless and we can keep the premium
Profit = call option premium
Loss = unlimited
BEP = call option strike price - call option premium
comment : it's too dangerous for individual investor, so don't do it !

Options Broker at http://optionsbroker.blogspot.com/.

Long Call Option

noreply@blogger.com (Option Trading Strategy) — Sun, 02 Dec 2007 17:16:00 +0000

Long Call Option strategy is the most basic of option trading strategies.

Long Call Option strategy's information :

Long Call Option is a strategy in online options trading to buy call option.
Order : Buy to open call options
Positive : the loss is limited but the profit is unlimited
Negative : the time decay is against you
Market Outlook : Bullish or expect the stock price would go up
Profit = Stock Price - Strike Price - Call Premium
Loss = Call premium
BEP = Strike Price + Call Premium

Online Options Trading : http://onlineoptionstrading.blogspot.com/.

Which Strategy is the best in Online Options Trading

noreply@blogger.com (Option Trading Strategy) — Sun, 28 Oct 2007 11:50:00 +0000

Online options traders can use option trading strategies to take positions based on their expectation of the underlying stock over the life of the options. There are six types of option trading strategy :

call option
put option
covered call
protective put
spread options strategy
combination options strategy

Which one is the best in Online Options Trading ?

I think all strategies are good, it depends on your expectation of the underlying stocks. So my advice is learn them all and then pick one and master it.

Option Trading Strategy

noreply@blogger.com (Option Trading Strategy) — Mon, 15 Oct 2007 10:34:00 +0000

Option Trading Strategy will discuss all option trading strategies that can be used to make profit in options trading. Let's learn option trading strategy together.