SPECIAL Market Option Trading Strategies
Key Points to Remember:
Special Market Strategies work best in those times when you are expecting a BIG move but are uncertain as to the direction of the move. This is specially true during times of the Union Budget, company results, etc.
ALL options eventually lose ALL of their "time value."
ALL "Out-Of-The-Money" options expire worthless.
Markets only "trend" 1/3 of the time; they move sideways the other 2/3.
I have arranged the four special option market strategies as follows:
Option Strategy
Description
Reason to use
When to use
Straddle Purchase
Buy Put & Call.
Options will lose time value premium quickly.
Options under-valued & market likely to make a big move.
Covered Call
Buy future & sell Call.
Collect premium on Calls sold.
Neutral to slightly bullish.
Covered Put
Sell future & sell Put.
Collect premium of Puts sold.
Neutral to slightly bearish.
Synthetic futures position
Buy Call (Put) & Sell Put (Call).
Neutral, slightly trending market.
Receive credit, option sold far out of the money.
Key Points to Remember:
Special Market Strategies work best in those times when you are expecting a BIG move but are uncertain as to the direction of the move. This is specially true during times of the Union Budget, company results, etc.
ALL options eventually lose ALL of their "time value."
ALL "Out-Of-The-Money" options expire worthless.
Markets only "trend" 1/3 of the time; they move sideways the other 2/3.
I have arranged the four special option market strategies as follows:
Option Strategy
Description
Reason to use
When to use
Straddle Purchase
Buy Put & Call.
Options will lose time value premium quickly.
Options under-valued & market likely to make a big move.
Covered Call
Buy future & sell Call.
Collect premium on Calls sold.
Neutral to slightly bullish.
Covered Put
Sell future & sell Put.
Collect premium of Puts sold.
Neutral to slightly bearish.
Synthetic futures position
Buy Call (Put) & Sell Put (Call).
Neutral, slightly trending market.
Receive credit, option sold far out of the money.
