Options Strategies
Options strategies combine one or more options contracts, and sometimes the underlying stock, to create positions with specific risk/reward profiles. The right strategy depends on your market outlook, risk tolerance, and objectives.
All strategies involve risk. More complex strategies may require higher account approval levels and are not suitable for all investors. Paper trade or use small positions when learning new strategies.
Strategy Overview
| Strategy | Risk Level | Market View |
|---|---|---|
| Covered Call | Low | Neutral to slightly bullish |
| Protective Put | Low | Bullish with protection |
| Bull Call Spread | Medium | Moderately bullish |
| Bear Put Spread | Medium | Moderately bearish |
| Iron Condor | Medium | Neutral, range-bound |
| Straddle | High | Expecting large move, direction uncertain |
| Strangle | High | Expecting large move, direction uncertain |
| Cash-Secured Put | Medium | Neutral to bullish |
All Strategies
Covered Call
Sell call options against shares you own to generate income.
Protective Put
Buy puts to protect existing stock positions from downside.
Bull Call Spread
Buy a call and sell a higher strike call for defined-risk bullish exposure.
Bear Put Spread
Buy a put and sell a lower strike put for defined-risk bearish exposure.
Iron Condor
Sell both a put spread and call spread to profit from low volatility.
Straddle
Buy both a call and put at the same strike to profit from big moves.
Strangle
Buy an OTM call and OTM put to profit from volatility at lower cost.
Cash-Secured Put
Sell puts backed by cash to generate income or acquire stock at lower prices.
Choosing a Strategy
Consider these factors when selecting a strategy:
- Market Outlook: Are you bullish, bearish, or neutral?
- Volatility View: Do you expect volatility to increase or decrease?
- Risk Tolerance: How much are you willing to lose?
- Capital Available: Some strategies require more capital than others.
- Time Horizon: How long are you willing to hold the position?