Traders frequently enter the options market with little knowledge of the options strategies available to them.
Options strategies limit risk and maximise return. Traders can use stock options' flexibility and power with a little effort.
This is a popular strategy because it generates income while reducing the risk of being long solely on the stock.
In a married put strategy, an investor buys an asset (such as stock) and simultaneously buys put options on the same number of shares.
In a bull call spread strategy, an investor buys calls at one strike price while simultaneously selling the same number of calls at a higher strike price.
Vertical spread also includes bear put spread. In this strategy, the investor simultaneously buys and sells put options at different strike prices.
When you own the underlying asset, you buy an out-of-the-money (OTM) put option and write an OTM call option (of the same expiration).
An investor purchases a call and put option on the same underlying asset with the same strike price and expiration date.
Previous strategies required two positions or contracts. A long butterfly spread using call options combines bull and bear spreads.