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Positive Gamma Strategies

Options strategies can vary in nature, well beyond speculating on the direction of an underlying security or benefiting from time decay.  For traders that are looking to benefit from increased implied and historical volatility there are strategies that can be employed that earn...

Using charts to time an options trade

While there are vital differences between options trading and trading in stocks, forex or futures, there are also some similarities. One of them is that you should not simply enter an options trade without even a cursory glance at the price chart for the underlying asset...

Delta Neutral Options Trading

Introduction In order to understand Delta Neutral options trading, a trader should first be familiar with the Options Greeks of Delta and Gamma and understand the interaction between these concepts and volatility and time decay. Definition: A Delta Neutral options position is one...

Covered Calls

If one has to select the most basic of all options trading strategies, the covered call would certainly be one of the strongest contenders. With a covered call an owner of stocks tries to earn a regular income by writing call options against his or her share holdings. A covered...

The butterfly options spread

The butterfly spread, or to be more precise the long butterfly spread, is a relatively advanced neutral options trading strategy with limited loss and limited profitability. It is normally put on for a debit, which places it in the category of debit spreads. Let us have a closer...

Options strangles explained

A long strangle is a trading strategy used in volatile markets when the trader expects the price of the underlying asset to break out upwards or downwards. As such it will profit with both a strong upward and a strong downward price movement. Fig. 8.16 is a risk/reward chart for...

Options long straddles explained

The long straddle is an options trading strategy which is perfectly suited to a volatile market where the trader is not certain whether the underlying trading asset will break out to the upside or downside. As such it will be profitable with either a large increase or decrease in...

Summary of bullish options trading strategies

Introduction The first type of trade most beginner options traders make will probably involve a bullish strategy. This is quite understandable, since many traders migrate to options from the world of stock trading where one makes money if the price of the underlying stock moves...