It is important to understand that a trader must have an
overview of the underlying assets before initiating an options strategy. Many
options traders trade with the goal of getting rich overnight! However, as you
know, there is no shortcut to success and this is true in options trading as
well. So, in this article, we are going to talk about options strategies
(two-legged strategies) that have the potential to generate decent returns by
keeping risk under control.
Before we begin, 0
So, let's start with strategy construction.
In case our view is moderately bullish, we may use this strategy:
If a trader is expecting that there would be a moderately
bullish view on the underlying stock’s price during the options’ term, he/she
may initiate a Bull Put Spread Option Strategy.
What is Bull Put Spread? It is a two-leg option strategy and as the name suggests, it is constructed by using only Put options. It involves shorting one Put option with a higher strike price (in-the-money) and buying one Put option with a lower strike price (out-of-the-money) of the same expiration date. Strike selection should be based on a broad view of the stock or index and its winning probability.
