Ten popular options trading strategies in London

 


Options trading is a type of investment that allows investors to trade options contracts on underlying assets. An option contract gives the buyer the entitlement, but not the duty, to purchase or trade-in a primary asset at a set price on or before a specific date. Traders buy and sell options to profit from changes in the price of the underlying assets.

There are many different options strategies that traders can use when trading options contracts. Each strategy is designed to profit from a significant move in the underlying asset price. Some popular options trading strategies in London include:

The bull spread

The bull spread is a type of options strategy used when the trader expects the price of the underlying asset to increase. The bull spread is generated by buying a call option and selling a call option with a higher strike price. 

The bear spread

The bear spread is a type of options strategy used when the trader expects the price of the underlying asset to decrease. The bear spread is created by buying a put option and selling a put option with a lower strike price. 

The straddle

The straddle is a type of options strategy used when the trader expects the underlying asset's price to make a significant move, up or down. The straddle is created by buying a call option and a put option with the same strike price. 

The bull call spread

The bull call spread is a strategy used when the trader expects the underlying asset's price to increase. The bull call spread is generated by buying a call option and selling a call option with a higher strike price. 

The bear put spread

The bear put spread is a type of options strategy used when the trader expects the price of the underlying asset to decrease. The bear put spread is created by buying a put option and selling a put option with a lower strike price.

The covered call

The covered call is a type of options strategy used when the trader is bullish on the underlying asset and wants to generate income from the position. The covered call is created by buying an underlying asset and selling a call option on the same underlying asset. 

The protective put

The protective put is a type of options strategy used when the trader is bearish on the underlying asset and wants to protect their downside risk. The protective put is created by buying a put option on the underlying asset. 

The long straddle

The long straddle is a type of options strategy used when the trader expects the underlying asset's price to make a significant move, up or down. The long straddle is created by buying a call option and a put option with the same strike price.

The iron condor

The iron condor is a type of options strategy used when the trader wants to generate income from the position. The iron condor is created by buying two call options and two put options with different strike prices. This strategy is designed to generate income from the difference in the prices of the call and put options.

The long butterfly

The long butterfly is a type of options strategy used when the trader expects the underlying asset's price to move sideways. The long butterfly is created by buying a call option, selling a call option and buying a put option with an identical closing time. This strategy is designed to profit from a sideways move in the underlying asset price.

In conclusion

Options trading is a great way to profit from movements in the price of underlying assets. Traders can use several different options trading strategies to take advantage of different market conditions. When choosing an options trading strategy, it is crucial to consider your market outlook and risk tolerance. It is also vital to understand the risks and rewards associated with each strategy. As with any investment decision, it is essential to consult with a financial advisor before implementing an options trading strategy. Have a look at the Saxo capital markets here.

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