Options Trading

🌱 Beginner Topics

1. Introduction to Options
Basic concepts, calls vs puts, rights & obligations
2. Buying & Selling Options
Understanding option positions and basic strategies
3. Strike Price & Expiration
Choosing strikes, understanding expiration

📚 Intermediate Topics

4. The Greeks
Delta, gamma, theta, vega, and risk management
5. Option Strategies
Spreads, straddles, covered calls, and more
6. Hedging Techniques
Portfolio protection and risk management

🎓 Expert Topics

7. Volatility & Skew
Advanced volatility concepts and trading
8. Market Makers & Flow
Understanding dealer positioning and hedging
9. Expiration Mechanics
Pin risk, max pain, and expiration dynamics

The Ultimate Guide to Options Trading Strategies

Understanding When and How to Use Each Strategy

Options strategies are like tools in a toolbox—each one has its specific purpose and best time to use. This guide will help you understand when and how to use each strategy effectively.

What This Guide Covers

  • Setup Instructions → How to enter each trade
  • When to Use It → Best market conditions for success
  • Profit/Loss Potential → How and when it makes/loses money

Part 1: Basic Directional Strategies

Strategy
Market View
Risk Level
Potential Return
Long Call
Bullish
Limited
Unlimited
Long Put
Bearish
Limited
High
Short Call
Neutral/Bearish
Unlimited
Limited
Short Put
Neutral/Bullish
High
Limited

Strategy 1.1: Long Call

What It Is: Buy a call option to profit from stock price increase

When to Use: When you expect a significant upward move

Risk/Reward Profile:

  • Profit: If stock price rises above strike + premium paid
  • Loss: If stock doesn't rise, lose entire premium paid

Example: Buy a $50 Call on AAPL for $3

  • If AAPL rises to $60, you profit big
  • If AAPL stays at $50 or lower, you lose the $3 premium

Strategy 1.2: Long Put

What It Is: Buy a put option to profit from stock price decrease

When to Use: When you expect a significant downward move

Risk/Reward Profile:

  • Profit: If stock price falls below strike - premium paid
  • Loss: If stock doesn't drop, lose entire premium paid

Example: Buy a $50 Put on AAPL for $3

  • If AAPL falls to $40, you profit big
  • If AAPL stays at $50 or higher, you lose the $3 premium

Part 2: Income Strategies

Strategy
Market View
Risk Level
Income Potential
Covered Call
Neutral/Bullish
Low
Moderate
Cash-Secured Put
Neutral/Bullish
Moderate
Moderate
Iron Condor
Neutral
Limited
Moderate
Calendar Spread
Neutral
Limited
Moderate

Part 3: Advanced Strategies

Strategy
Market View
Complexity
Capital Required
Butterfly
Very Neutral
High
Moderate
Ratio Spread
Directional
High
High
Back Spread
Volatility
Very High
High

Strategy Selection Guide

Choose Based On:

  • Market outlook (direction and volatility)
  • Risk tolerance and capital available
  • Time commitment for management
  • Experience level with options

Quick Decision Guide:

  • Bullish? → Long calls or bull spreads
  • Bearish? → Long puts or bear spreads
  • Neutral? → Iron condors or butterflies
  • High volatility? → Sell premium
  • Low volatility? → Buy premium

Ready to Test Your Strategy Knowledge?

Take the Strategies Quiz →