FIN VIRAJ OPTION STRATEGIES
BULLISH STRATEGIES
Long Call: A long call is a simple and popular bullish strategy where the trader buys a call option, which gives them the right to buy the underlying asset at a specific price (strike price) on or before a specific date (expiration date). The strategy is profitable if the price of the underlying asset goes up.
Bull Call Spread: A bull call spread involves buying a call option at a lower strike price and selling a call option at a higher strike price. This strategy is used when the trader expects a moderate increase in the price of the underlying asset. The profit potential is limited, but so is the risk.
Bull Put Spread: A bull put spread is similar to a bull call spread, but with put options instead of call options. The trader sells a put option at a lower strike price and buys a put option at a higher strike price. This strategy is used when the trader expects a moderate increase in the price of the underlying asset.
Long Synthetic Call: A long synthetic call involves buying a call option and simultaneously selling a put option at the same strike price and expiration date. The strategy is used when the trader expects a significant increase in the price of the underlying asset. The profit potential is unlimited, but the risk is also higher than with other bullish strategies.
Covered Call: A covered call involves buying the underlying asset and selling a call option against it. The strategy is used when the trader expects the price of the underlying asset to increase slightly. The profit potential is limited, but the risk is also lower than with other bullish strategies.
BEARISH STRATEGIES
Long Put: A long put is a simple and popular bearish strategy where the trader buys a put option, which gives them the right to sell the underlying asset at a specific price (strike price) on or before a specific date (expiration date). The strategy is profitable if the price of the underlying asset goes down.
Bear Put Spread: A bear put spread involves buying a put option at a higher strike price and selling a put option at a lower strike price. This strategy is used when the trader expects a moderate decrease in the price of the underlying asset. The profit potential is limited, but so is the risk.
Bear Call Spread: A bear call spread is similar to a bear put spread, but with call options instead of put options. The trader sells a call option at a lower strike price and buys a call option at a higher strike price. This strategy is used when the trader expects a moderate decrease in the price of the underlying asset.
Long Synthetic Put: A long synthetic put involves buying a put option and simultaneously selling a call option at the same strike price and expiration date. The strategy is used when the trader expects a significant decrease in the price of the underlying asset. The profit potential is unlimited, but the risk is also higher than with other bearish strategies.
Protective Put: A protective put involves buying the underlying asset and buying a put option against it. The strategy is used when the trader wants to protect their long position in the underlying asset from a potential downside risk. The profit potential is limited, but the risk is also lower than with other bearish strategies.
NEUTRAL / SIDE-WAYS STRATEGIES
Iron Condor: An iron condor involves selling a call option with a higher strike price and buying a call option with an even higher strike price, as well as selling a put option with a lower strike price and buying a put option with an even lower strike price. This strategy is used when the trader expects the price of the underlying asset to remain relatively stable within a specific range. The profit potential is limited, but so is the risk.
Short Straddle: A short straddle involves selling both a call option and a put option at the same strike price and expiration date. This strategy is used when the trader expects the price of the underlying asset to remain relatively stable. The profit potential is limited, but the risk is also higher than with other sideways strategies.
Long Straddle: A long straddle involves buying both a call option and a put option at the same strike price and expiration date. This strategy is used when the trader expects a significant move in the price of the underlying asset, but is unsure of the direction. The profit potential is unlimited, but the risk is also higher than with other sideways strategies.
Butterfly Spread: A butterfly spread involves selling two options at a middle strike price and buying one option each at a higher and lower strike price. This strategy is used when the trader expects the price of the underlying asset to remain relatively stable within a specific range. The profit potential is limited, but so is the risk.
Calendar Spread: A calendar spread involves buying a long-term option and selling a short-term option at the same strike price. This strategy is used when the trader expects the price of the underlying asset to remain relatively stable in the short term, but may move in a certain direction in the long term. The profit potential is limited, but so is the risk.
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