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Here are summaries of six common options trading strategies both beginning and advanced investors could consider, including their purposes, how they work, benefits and risks: Name Purpose
The trader may also forecast how high the stock price may go and the time frame in which the rally may occur in order to select the optimum trading strategy for buying a bullish option. The most bullish of options trading strategies, used by most options traders, is simply buying a call option. The market is always moving.
In this option trading strategy, the trader buys a call — referred to as “going long” a call — and expects the stock price to exceed the strike price by expiration.
In finance, a credit spread, or net credit spread is an options strategy that involves a purchase of one option and a sale of another option in the same class and expiration but different strike prices. It is designed to make a profit when the spreads between the two options narrows.
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Here are five option strategies for advanced investors and how they work. ... The best brokers for options trading can help you identify attractive options trades. 2. Bear put spread.
The trader will then receive the net credit of entering the trade when the options all expire worthless. [2] A short iron butterfly option strategy consists of the following options: Long one out-of-the-money put: strike price of X − a; Short one at-the-money put: strike price of X; Short one at-the-money call: strike price of X
Option trading can deliver tremendous profits, but the flip side of those gains is the potential for tremendous losses, since option trading is a zero-sum game.