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This article needs additional citations for verification. Option strategies are the simultaneous, and often mixed, buying or selling of one or more options that differ in one or more of the options’ variables. Bullish options strategies are employed when the options trader expects the underlying stock price to move upwards. Bearish combo called a Calendar Spread and not even rely on stock movement. The trader can also just assess how high the stock price can go and the time frame in which the rally will occur in order to select the optimum trading strategy for just buying a bullish option. The most bullish of options trading strategies is simply buying a call option used by most options traders. The stock market is always moving somewhere or some how.
It’s up to the stock trader to figure what strategy fits the markets for that time period. Moderately bullish options traders usually set a target price for the bull run and utilize bull spreads to reduce cost or eliminate risk altogether. There is limited risk when trading options by using the appropriate strategy. Mildly bullish trading strategies are options that make money as long as the underlying stock price does not go down by the option’s expiration date. These strategies may provide downside protection as well. Writing out-of-the-money covered calls is a good example of such a strategy. However, Covered Calls usually require the trader to buy actual stock in the end which needs to be taken into account for margin.
Think of options as the building blocks of strategies for the market. Options have been around since the market started, they just did not have their own spotlight until recently. Bearish options strategies are employed when the options trader expects the underlying stock price to move downwards. It is necessary to assess how low the stock price can go and the time frame in which the decline will happen in order to select the optimum trading strategy. Selling a Bearish option is also another type of strategy that gives the trader a “credit”.