Options are very flexible and no-obligation financial instruments used to make money from different market conditions and/or to limit trading risks and exposure. Options strategies are methods to achieve specific options trading goals and to raised utilize different opportunities and market conditions. Unlike most other financial instruments options enable traders to profit from any market conditions even in fast downtrends and in no price changes.
You can find several different options trading strategies available now and new ones are invented everyday. Some of them are widely popular and followed but some others are trading secretes of some persons or groups. You can find no strategies to benefit from every market condition; in fact for successful implementation, many of them require some prerequisites. Options trading strategies may be simple which require normal trading platforms and include one or two contracts/traders OR could be complex which require sophisticated trading systems and involves many contracts/trades.
With regards to the nature and implementation, options trading strategies can be categorized to 3 main groups as nifty option tips,
1. Bullish: These are strategies which are utilized when the underlying product price is likely to go up. In other words the successful implementation requires price increase of the underlying product. Examples include short put, long call, synthetic long stock, bull spread, etc.
2. Bearish: They’re utilized once the underlying product price is anticipated to decrease and successful implementation requires price decrease. Examples include long put, short call, bear spread, synthetic short stock, etc.
3. Non-Directional or Market Neutral: These strategies are utilized on expected price volatility of the underlying instrument and aren’t depend on price ups and downs. Success with these is achieved when the expected price fluctuation is achieved or not-achieved. Examples include straddles, strangles, butterfly, etc. Non-directional strategies may be further divided to two as bullish-on-volatility and bearish-on-volatility.
As well as the aforementioned three main categories two other categories also exists which are event-driven and stock-combination strategies; the former expects/considers a certain event like mergers and takeovers and attempt to profit from that and the later is complex tactics including combinations of trades or option types.
There are no options trading strategy that suit every trader. In fact a good choice should be determined by many factors like the underlying product, market conditions and volatility, trader experience, use of quotes and sophisticated trading systems, brokerage service trader using, trader portfolio size and risk tolerance, long-term or short-term trading goals, and money management. Although, lots of today’s trading systems are pre-loaded to aid many popular strategies it is a good idea to learn the maximum amount of strategies as you are able to and to make them easy to get at to you. The general recommendation is that to implement simple one when you’re a novice and switch to more technical ones as you can know more about different choices, industry and its movements.