Author: Smart Trader

Long Straddle Option Trading Explained The long straddle is an options strategy used when a trader believes the market is about to make a significant move but has no conviction about direction. Instead of picking up or down, the trader buys both a call option and a put option with the same strike price and the same expiration date. This creates a position that profits from volatility. If the...

Short Strangle Option Trading Explained The short strangle is an options strategy used by traders who believe the market will remain relatively stable in the near term. It involves selling both a call option and a put option on the same underlying asset, with different strike prices but the same expiration date. Typically, the call is sold above the current market price, while the put is sold...

  What Is The Iron Condor in Options Trading? The iron condor strategy is one of the most popular income-generating options strategies. It is a net credit spread that profits when the underlying asset trades within a certain range. Traders use it when they expect low volatility and want to take advantage of time decay (theta). Unlike high-risk naked options trades, the iron condor has defined...

Short Straddle Strategy Explained A short straddle is an options strategy used when an investor expects very little movement in the price of the underlying asset. It involves selling a call option and a put option with the same strike price and expiration date. How it works: By selling both options, the trader collects premiums upfront. The maximum profit is limited to the total premium...

This intermediate option trading strategy aims to profit from a neutral to slightly bullish price action in the underlying stock. A bull put spread consists of one short put at a higher strike price and one long put at a lower strike price. Both puts have the same underlying stock and the same expiration date. A bull put spread is established for a net credit (or net amount received) and profits...

Goal To profit from neutral to bearish price action in the underlying stock. A bear call spread consists of one short call with a lower strike price and one long call with a higher strike price. Both calls have the same underlying stock and the same expiration date. A bear call spread is established for a net credit (or net amount received) and profits from either a declining stock price or from...

In the above example: Buy 1 Put strike 95 Sell 2 Puts strike 105 Buy 1 Put strike 110 The position may be established for a net debit or a net credit, depending on the bid-ask quotations, and both the potential profit and maximum risk are limited. Strike prices are equidistant, and all options have the same expiration month. Risk is limited to the net debit paid: after the trade is paid for,...

In the above example: Buy 1 Call strike 95 Sell 2 Calls strike 100 Buy 1 Call strike 110 The position may be established for a net debit or a net credit, and both the potential profit and maximum risk are limited. Strike prices are equidistant, and all options have the same expiration month. Risk is limited to the net debit paid: after the trade is paid for, no additional margin is...

The Iron Butterfly spread is a way to profit from neutral stock price action near the strike price of the short options (center strike) with limited risk. It is is a four-part strategy consisting of a bull put spread, and a bear call spread in which the short put and short call have the same strike price. All options have the same expiration date, and the three strike prices are equidistant. In...