What Are Options?

Option Trading Strategies


Introduction to options strategies

Options are far more flexible that stock buying and selling. Because of this flexibility, you can find a strategy that will help you profit in any type of market. With the right strategies, you can make money when the market moves up a little, or a lot. You can make money when the market moves down a little or a lot. You can even make money when the market stays right where it is. 

On this page you will find option strategies that are categorized by the reasons you would select a specific strategy. Each category will have an explanation about why you might choose the strategies that belong to the category.  Some of the strategies may appear in multiple categories. Click on the strategy to go to a more detailed explanation of the strategy.

Bullish Stock Options Strategies
Strategies that Make Money as The Stock Price Rises


Strategies in this category would be appropriate when you believe that the stock price will rise before the options expire. Some of these strategies require the the stock to move up a lot and some require the stock to move up a little or just not move down. In other words all of these option strategies have a bullish bias for the underlying asset.

Buy Call

Covered Call

Married Put

Sell Put

Bull Call Vertical Debit Spread

Bull Put Vertical Credit Spread

Diagonal Bull Call Debit Spread

Diagonal Bull Put Credit Spread

Bull Call Back Spread

Bull Call Ratio Spread

Bearish Stock Options Strategies
Strategies that Make Money as The Stock Price Falls

Strategies in this category would be appropriate when you believe that the stock price will fall before the options expire. Some of these strategies require the the stock to move down a lot and some require the stock to move down a little or just not move up. In other words all of these option strategies have a bearish bias for the underlying asset.

Buy Put

Covered Put

Sell Call

Bear Put Vertical Debit Spread

Bear Call Vertical Credit Spread

Diagonal Bear Put Debit Spread

Diagonal Bear Call Credit Spread

Bear Put Back Spread

Bear Put Ratio Spread

Neutral Stock Options Strategies
Strategies that Make Money Without a Directional Bias

Strategies in this category would be appropriate when you do not know or do not care which way stock price will move in the future before the options expire. Some of these strategies require the the stock to make a big move and some require the stock to move very little or not at all. In other words all of these option strategies have no directional bias for the underlying asset.

BIG MOVES:

Straddle

Strangle

SMALL TO NO MOVE:

Iron Condor

Butterfly Spread

Iron Butterfly

Horizontal Calendar Spread

Conversion Reversal

Rising Volatility Options Strategies
Strategies that Make Money When Volatility Increases

Strategies in this category would be appropriate when implied volatility is very low and expected to rise before the options expire. These are option buying strategies.

Buy Call

Buy Put

Straddles

Strangles

Married Put

Falling Volatility Options Strategies
Strategies that Make Money When Volatility Decreases

Strategies in this category would be appropriate when implied volatility is very high and expected to fall before the options expire. These are option selling strategies or strategies that are net selling.

Short Put

Covered Calls

Short Call

Covered Put

Iron Condor

Butterfly Spread

Iron Butterfly Spread

Volatility Difference Options Strategies
Strategies that Make Money When Volatility Differences Resolve

Strategies in this category would be appropriate when implied volatility is higher on one option and lower in another. These are option combination strategies that can take advantage of the implied volatility differences between the option resolving before all the options or at least some of the options expire.

Diagonal Bull Call Debit Spread

Diagonal Bull Put Credit Spread

Diagonal Bear Put Debit Spread

Diagonal Bear Call Credit Spread

Bull Call Back Spread

Bull Call Ratio Spread

Bear Put Back Spread

Bear Put Ratio Spread

Horizontal Calendar Spread

Conversion Reversal

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