Learn about Option Strategies

Options trading strategies encompass a variety of methods that traders use to take advantage of different market scenarios. These range from simple to complex and can be adapted to match an investor’s risk tolerance and objectives. For instance, a covered call strategy involves selling call options while holding the underlying stock, aiming to earn income but limiting the profit potential. In contrast, a protective put strategy is used for downside protection, where put options are bought to hedge against a decline in stock value. More advanced strategies like bull call spreads and bear put spreads are employed based on the trader’s expectation of the market moving moderately upwards or downwards, respectively. Each strategy carries its unique risks and rewards, and successful options trading hinges on a robust understanding of market dynamics and a strategic investment approach.