Options Trading Strategies List For Beginners From A to Z - Singapore Forex Trading, Singapore Forex Academy, Singapore Forex Association

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Options Trading Strategies List For Beginners From A to Z

Options trading strategy is one of the most complex subjects in options trading, but it's a subject that any options trader needs to be familiar with. There is a huge range of different strategies that can be can used when trading options, and these all have varying characteristics. Each one is essentially a unique type of options spread, which involves combining multiple positions based on the same underlying security into one overall position.
There are a number of reasons why these spreads are used and they are very powerful tools if you know how to use them correctly. Ultimately, it's the ability to create these spreads that makes options trading such a versatile and potentially profitable form of investment.
Although some of the strategies for trading options are quite straightforward and easy to understand, many of them are complicated and involve several different components. While it isn'tt essential to have a working knowledge of each and every strategy that can be used, you are far more likely to be successful and make money consistently if you have a good idea of which ones to use and when.
  • Bullish Strategies
  • Bearish Strategies
  • Strategies for Neutral Market
  • Strategies for Volatile Market

List of Bullish Options Trading Strategies

Long Call
This is a single position strategy that involves only one transaction. It's suitable for beginners and comes with an upfront cost.
Short Put
Only one transaction is required for this, and it produces an upfront credit. It isn't suitable for beginners.
Bull Call Spread
This is a simple strategy suitable for beginners. It involves two transactions to create a debit spread.
Bull Put Spread
This is straightforward but it's not really suitable for beginners because of the trading level required. A credit spread is created using two transactions.
Bull Ratio Spread
This is complex and requires two transactions; as such it isn't suitable for beginners. It can create either a debit spread or credit spread, depending on the ratio of options bought to options written.
Short Bull Ratio Spread
This relatively complicated trading strategy isn't ideal for beginners. Two transactions are involved, and a credit spread is created.
Bull Butterfly Spread
There are two types of bull butterfly spread: the call bull butterfly spread and the put bull butterfly spread. It's a complex trading strategy, requiring three transactions, that creates a debit spread. It isn't suitable for beginners.
Bull Condor Spread
There are two types of bull condor spread: the call bull condor spread and the put bull condor spread. This strategy requires four transactions and it's not suitable for beginners. It creates a debit spread.
Bull Call Ladder Spread
This is a complex trading strategy requiring three transactions. It creates a debit spread and it's not suitable for beginners.

List of Bearish Strategies

Long Put
This is a single position strategy that involves only one transaction. It's suitable for beginners and comes with an upfront cost.
Short Call
Only one transaction is required for this single position strategy, and it produces an upfront credit. It isn't suitable for beginners.
Bear Put Spread
This simple strategy is perfectly suitable for beginners. It involves two transactions, which are combined to create a debit spread.
Bear Call Spread
This is relatively straightforward strategy, but it requires a high trading level so it isn't really suitable for beginners. A credit spread is created using two transactions.
Bear Ratio Spread
This is complex and not suitable for beginners. It requires two transactions and can create either a debit spread or credit spread, depending on the ratio of options bought to options written.
Short Bear Ratio Spread
This is fairly complicated and not ideal for beginners. A credit spread is created and two transactions are involved.
Bear Butterfly Spread
The bear butterfly spread has two variations: the call bear butterfly spread and the put bear butterfly spread. It's not suitable for beginners; it requires three transactions and creates a debit spread.
Bear Put Ladder Spread
This requires three transactions to create a debit spread. It's not suitable for beginners due to its complexities.

List of Neutral Strategies

Covered Call
This is relatively simple and would typically be used if you already own a security and want to profit from it being in a neutral trend. It's suitable for beginners.
Covered Call Collar
This is fairly simple and you would generally use it if you already own a security and want to profit from it being in a neutral trend and protect it against any losses should it fall in price. It is suitable for beginners.
Covered Put
This is reasonably complex and combines short selling a security and writing put options. It's not suitable for beginners.
Short Straddle
This is a relatively simple trading strategy, but it's not really suitable for beginners due to the high trading level required. It involves two transactions and creates a credit spread.
Short Strangle
This is quite straightforward but requires a high trading level so it's not suitable for beginners. It creates a credit spread and involves two transactions.
Short Gut
This combines two transactions to create a credit spread. It's quite simple, but it requires a high trading level meaning it isn't suitable for a beginner.
Calendar Call Spread
This is simple enough to be used by beginners. Two transactions are involved and a debit spread is created.
Calendar Put Spread
This is straightforward and involves two transactions. It creates a debit spread and is suitable for beginners.
Call Ratio Spread
This is a complicated trading strategy that is not suitable for beginners. There are two transactions involved and a credit spread is created.
Put Ratio Spread
This is complex and not for beginners. It creates a credit spread with two transactions.
Calendar Straddle
This involves four separate transactions to create a debit spread. It isn't suitable for beginners.
Calendar Strangle
This creates a debit spread. There are four transactions involved and it isn't suitable for beginners.
Butterfly Spread
This is complex and involves three transactions to create a debit spread. It isn't suitable for beginners.
Condor Spread
This is complex and it creates a debit spread using four separate transactions. It isn't suitable for beginners.
Albatross Spread
This involves four transactions and is complicated. It creates a debit spread and is not suitable for beginners.
Iron Butterfly Spread
This is complex and creates a credit spread. It involves four transactions and it's not suitable for beginners.
Iron Condor Spread
This is complex, involving four transactions, and it's not suitable for beginners. It creates a credit spread.
Iron Albatross Spread
This is complicated and not suitable for beginners. It involves four transactions and creates a credit spread.

Strategies for Volatile Market

Long Straddle
We have briefly discussed the long straddle above. It's one of the simplest volatile strategies and perfectly suitable for beginners. Two transactions are involved and it creates a debit spread.
Long Strangle
This is a very similar strategy to the long straddle, but has a lower upfront cost. It's also suitable for beginners.
Strip Straddle
This is best used when your outlook is volatile but you think a fall in price is the most likely. It's simple, involves two transactions to create a debit spread, and is suitable for beginners.
Strip Strangle
This is basically a cheaper alternative to the strip straddle. It also involves two transactions and is well suited for beginners.
Strap Straddle
You would use this when your outlook is volatile but you believe that a rise in price is the most likely. It is another simple strategy that is suitable for beginners.
Strap Strangle
The strap strangle is essentially a lower cost alternative to the strap saddle. This simple strategy involves two transactions and is suitable for beginners.
Long Gut
This is a simple, but relatively expensive, strategy that is suitable for beginners. Two transactions are involved to create a debit spread.
Call Ratio Backspread
This more complicated strategy is suitable for when your outlook is volatile but you think a price rise is more likely than a price fall. Two transactions are used to create a credit spread and it is not recommended for beginners.
Put Ratio Backspread
This is a slightly complex strategy that you would use if your outlook is volatile but you favour a price fall over a price rise. A credit spread is created using two transactions and it is not suitable for beginners.
Short Calendar Call Spread
This is an advanced strategy that involves two transactions. It creates a credit spread and is not recommended for beginners.
Short Calendar Put Spread
This is an advanced strategy that is not suitable for beginners. It involves two transactions and creates a credit spread.
Short Butterfly Spread
This complex strategy involves three transactions and creates a credit spread. It isn't suitable for beginners.
Short Condor Spread
This advanced strategy involves four transactions. A credit spread is created and it isn't suitable for beginners.
Short Albatross Spread
This is a complex trading strategy that involves four transactions to create a credit spread. It isn't recommended for beginners.
Reverse Iron Butterfly Spread
There are four transactions involved in this, which create a debit spread. It's complex and not recommended for beginners.
Reverse Iron Condor Spread
This advanced strategy creates a debit spread and involves four transactions. It isn't suitable for beginners.
Reverse Iron Albatross Spread
This is a complex trading strategy that is not suitable for beginners. It creates a debit spread using four transactions.