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Limited Risk Option trading strategies

What are the most used limited Risk Option Strategies ?

Below are the Limited Risk Option trading strategies with links for most famous ones of all on Quick Hack.

Limited Risk Option Strategy Cheat Sheet
Option Strategy
Price Outlook
Volatility Outlook
Profit Potential
Risk
Long Calls(Naked Call Buy)
 Bullish Rising Unlimited Limited
Long Puts(Naked Put Buy)
 Bearish Rising Unlimited Limited
Protective Put
 Bullish Stable Unlimited Limited
Bull Put Spread
 Bullish Rising Limited Limited
Bear call Spread
 Bearish Falling Limited Limited
Bull Call Spread
 Bullish Rising Limited Limited
Bear Put  Spread
 Bearish Falling Limited Limited
Iron Condors Neutral Falling Limited Limited
Iron Butterfly Spreads Neutral Falling Limited Limited
Calendar Spreads
 Neutral Rising Limited Limited
Double Calendars
 Neutral Rising Limited Limited
Long
… Read the rest

Successful Weekly Options Strategies – Greeks work for you !

How does this tricks work for Successful trading?

The trick works by making the Greeks work for you but not against you like Theta, Delta, Vega.

How to make a Trade on Options based on Trading day

Highest decay in Option premiums happen closer to the expiry.

For weekly options

  1. On Start of weekly options say Friday and Monday you can look for buy strategies with limited risk and limited reward using the Option strategies like Bull Call spread etc.. based on market outlook. Or even long iron condor if you anticipate a huge movement on any side.  Long straddle and Long straddle can also be used.
  2. On Towards end of Week that is Wednesday and Thursdays, time decay is
… Read the rest

Option Strategies – Bear Call Spread

Spreads versus naked positions

Most professional options traders prefer initiating a spread strategy versus taking on naked option positions. There is no doubt that spreads tend to shrink the overall profitability (max profits), but at the same time spreads give you a greater visibility on risk (max loss).

Always remember “Professional traders value ‘risk visibility’ more than the profits.”

It’s a much better deal to take on smaller profits as long as you know what would be your maximum loss under worst case scenarios.

Another interesting aspect of spreads is that invariably there is some sort of financing involved, wherein the purchase of an option is funded by the sale of another option. In fact, financing is one of the … Read the rest

Option Strategies – Bull Call Spread

Spreads versus naked positions

Most professional options traders prefer initiating a spread strategy versus taking on naked option positions. There is no doubt that spreads tend to shrink the overall profitability (max profits), but at the same time spreads give you a greater visibility on risk (max loss).

Always remember “Professional traders value ‘risk visibility’ more than the profits.”

It’s a much better deal to take on smaller profits as long as you know what would be your maximum loss under worst case scenarios.

Another interesting aspect of spreads is that invariably there is some sort of financing involved, wherein the purchase of an option is funded by the sale of another option. In fact, financing is one of the … Read the rest

Option Strategies – Bear Put Spread

Options Strategies – Bear Put Spread

Spreads versus naked positions

Most professional options traders prefer initiating a spread strategy versus taking on naked option positions. There is no doubt that spreads tend to shrink the overall profitability (max profits), but at the same time spreads give you a greater visibility on risk (max loss).

Always remember “Professional traders value ‘risk visibility’ more than the profits.”

It’s a much better deal to take on smaller profits as long as you know what would be your maximum loss under worst case scenarios.

Another interesting aspect of spreads is that invariably there is some sort of financing involved, wherein the purchase of an option is funded by the sale of another option. In … Read the rest

Option Strategies – Bull Put Spread

Options Strategies – Bull Put Spread

Spreads versus naked positions

Most professional options traders prefer initiating a spread strategy versus taking on naked option positions. There is no doubt that spreads tend to shrink the overall profitability (max profits), but at the same time spreads give you a greater visibility on risk (max loss).

Always remember “Professional traders value ‘risk visibility’ more than the profits.”

It’s a much better deal to take on smaller profits as long as you know what would be your maximum loss under worst case scenarios.

Another interesting aspect of spreads is that invariably there is some sort of financing involved, wherein the purchase of an option is funded by the sale of another option. In … Read the rest

Option Strategies- what is Iron Condor Strategy

Option Strategies- what is Iron Condor Strategy

These are captivating times we are living in, especially if you are an alternatives trader in India Starting 1st June 2020, NSE’s new margin framework is live, which essentially brings down the margin requirement for the hedged position.

What is a hedged position?

Like riding a bike without carrying a helmet. The risk of market-moving against your position, causing capital erosion is high. However, if you hedge your position, then the danger of losing capital reduces drastically. Now, think about this – if your capital loss is minimal, then it implies that the risk for your broking is also minimum right? Now, if the risk for the broking reduces, it also means the … Read the rest

Option Strategies – How to do “The Long & Short Strangle” ?

Option Strategies – How to do “The Long & Short Strangle” ?

Option Strategies – How to do “The Long & Short Strangle” ?

If you have understood the straddle, then grasp the ‘Strangle’ is quite straightforward. For all practical purposes, the thought method behind the straddle and strangle is quite similar. Strangle is an improvisation over the straddle, mainly to minimize the cost of implementation.

Setup

Nifty is trading at 15921, which would make 15900 the ATM strike.  If you have been to set up the long straddle here, you would be required to buy the 15900 CE and 15900 PE.

The premiums for both these alternatives are 66 and 57 respectively. Net cash outlay = 66 + 57 … Read the rest

Option Strategies – What is “The Short Straddle” ?

Option Strategies – What is “The Short Straddle” ?

Those who already read our “Long Straddle” Strategy would understood that for the long straddle to be profitable, we need a set of things to work in our favor, reposting the identical for your quick reference – The volatility should be relatively low at the time of approach execution
The volatility should increase during the conserving period of the strategy
The market should make a large go – the direction of the move does not matter
The predicted large move is time bound, should manifest quickly – well within the expiry

Long straddles are to be setup round major events, and the outcome of these events to be extensively different from … Read the rest

Option Strategies – The Long Straddle Strategy

Options Strategies – The Long Straddle

Number of times times have you been in a situation where you take a trade with great confidence, either long or short, and the market immediately reverses direction after you begin the trade? Your entire strategy, planning, effort, and capital are thrown out the window. I’m sure we’ve all been in a position like this. In fact, this is one of the reasons why most expert traders go beyond standard directional bets and develop systems that are resistant to market volatility. “Market Neutral” or “Delta Neutral” tactics are those whose profitability isn’t entirely dependent on market direction.

Long straddle is perhaps the simplest market neutral strategy to implement. Once implemented, the P&L is not … Read the rest