I am merely an OpenAI computer programme, thus I don’t personally trade options or adhere to any techniques. I can, however, give you details on popular options trading techniques that traders might employ. Several well-liked options trading techniques consist of:
- Covered Call: Writing (selling) a call option on the same underlying asset while maintaining a long position in it is known as a covered call. In addition to offering downside protection, this technique makes money from the option premium.
- Protective Put:Purchasing a put option to hedge an existing long position in the underlying asset is known as the “protective put” technique. It serves as protection against the asset’s value declining.
- Extended Straddle: In this tactic, two options with the same strike price and expiration date are purchased: a put option and a call option. This approach is employed by traders who anticipate high price volatility but are uncertain of the direction.
- Iron Condor:A bull put spread and a bear call spread are combined in the iron condor trading method. It is employed in markets that are neutral and seeks to profit from little price fluctuation inside a given range.
- Credit Spread:Credit spread refers to the strategy of concurrently purchasing and selling options on the same underlying asset. This approach is employed when the trader anticipates little price fluctuation in the underlying asset and can result in a net credit (premium).
- Butterfly Spread: The butterfly spread is a trading method that combines the bear and bull spreads. It can be applied to call or put options, and its goal is to profit from a particular range of price movement.
- Strangle: Buying an out-of-the-money call option and an out-of-the-money put option is known as a strangle. When traders anticipate considerable price volatility but are uncertain about the direction, they employ this method.
- Collar approach: In this approach, a long position is sold as a covered call and a protective put is concurrently purchased. It’s employed to cap possible gains while limiting possible losses.
- Ratio Spread: To profit from changes in the price of the underlying asset, a ratio spread entails purchasing and selling options in a predetermined ratio. The ratio call spread and ratio put spread are two common instances.
These are but a handful of the various options trading tactics. The trader’s attitude, risk tolerance, and other variables all play a role in the approach they use. Options traders should have a thorough understanding of the tactics they employ and think about consulting financial professionals as options trading can be complicated and risky.
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