Option trading best practices

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Thomas Wessel. Very systematic strategical approach vs. Easy to understand and follow. No sales pitch. Featured In. Pro Best value. Free Explore. Trade Options. Custom Strategy Builder. Analysis Tools. Try Sensibull Now. There are over options strategies that you can deploy. But how to spot a winning strategy?

It all depends on your comfort level and knowledge. Let us have a good overview of some of the popular options strategies. Read on. There are many options strategies that you will use over the period of time in markets. But, there are roughly three types of strategies for trading in options.

Firstly, you have the bullish strategies like bull call spread and bull put spread. Secondly, you have the bearish types of strategy such as bear call spread and bear put spread. Before you begin reading about options strategies, do open a demat account and trading account to be ready. You may never know when you get an opportunity to try out a winning strategy. A bull call spread is an options trading strategy that is aimed to let you gain from a index's or stock's limited increase in price.

The strategy is done using two call options to create a range i. A bull call spread can be a winning strategy when you are moderately bullish about the stock or index. If you believe that the stock or the index has great potential for upside, it is better not to use a bull call spread. In a bull put spread options strategy, you use one short put with a higher strike price and one long put with a lower strike price. Like the bull call spread, a bull put spread can be a winning strategy when you are moderately bullish about the stock or index. If both bull call spread and bull put spread are similar, then how do you benefit if they are both top gainers in terms strategy utility?

The difference lies in the fact that the bull call spread is executed for a debit while the bull put spread is executed for a credit i. A call ratio backspread is an options strategy that bullish investors use. This strategy is used when investors believe the underlying stock or index will rise by a significant amount. The call ratio back spread strategy combines the purchases and sales of options to create a spread with limited loss potential, but importantly, mixed profit potential.

The call ratio back spread is deployed for a net credit.

Remember, the loss is pre defined at all times. In a Bear Call Ladder strategy is a tweaked form off call ratio back spread. This options strategy is deployed for net credit, and the cash flow is better than in the call ratio back spread. The Synthetic Long and Arbitrage options strategy is when an investor artificially replicates a long futures pay off, using options.

The trick involves simultaneously buying at-the-money ATM call and selling at-the-money ATM put, this creates a synthetic long. Open a demat account with Nirmal Bang and use special options strategies today to make a profit. A bear put spread strategy consists of buying one put and selling another put at a lower strike. This is to offset a part of the upfront cost. But by writing another put with the same expiration, at a lower strike price, you are making a way to offset some of the cost. This winning strategy requires a net cash outlay or net debit at the outset. A bear call spread is done by buying call options at a specific strike price.

At the same time, the investor sells the same number of calls with the same expiration date but at a lower strike price.

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In this way, the maximum profit can be gained using this options strategy is equivalent to the credit got when starting the trade. This approach is best for those with limited risk appetite and satisfied with limited rewards. The put ratio back spread is also a bearish strategy in options trading. It involves selling a number of put options and buying more put options of the same underlying stock expiration date, but at a lower strike price. The put ratio back spread is for net credit.