Options Trading

Debit spreads involve buying an option and selling a further out-of-the-money option of the same type. This strategy profits from directional movement with limited risk.

Calendar spreads involve selling a near-term option and buying a longer-term option of the same strike. This strategy profits from time decay and potential volatility expansion.

Ratio spreads involve buying one option and selling multiple options of the same type at a different strike. This strategy offers cost reduction and potential for significant profit.

Butterfly spreads offer limited risk and profit potential. They suit traders expecting minimal price movement. This strategy targets specific price ranges.

Credit spreads generate income by selling options. They profit from time decay and limited price movement. Risk is capped at trade entry.

Straddles and strangles profit from large price movements. They are non-directional strategies. Defined risk or unlimited risk depends on the construction.

Condor spreads profit from neutral market conditions. They define both maximum profit and maximum risk. These strategies use four strike prices.

Synthetic long stock positions replicate the risk/reward profile of owning shares. Traders use this strategy for capital efficiency or specific market views. It involves buying calls and selling puts at the same strike and expiration.

Protective puts hedge existing long stock positions against market downturns. This strategy limits downside risk while allowing for unlimited upside potential. It functions like an insurance policy for your stock holdings.

Covered calls involve selling call options against owned shares to generate income. This strategy reduces the cost basis of the stock but caps upside potential. It suits bullish-to-neutral market outlooks.

A collar strategy combines a long stock position with a protective put and a covered call. It limits both upside and downside risk. This strategy aims for controlled risk and modest income generation.

The Iron Condor strategy profits from low volatility. It involves selling an out-of-the-money call spread and an out-of-the-money put spread.