Strategies to Options Trading FAQs

What does Relative Strength Index means ?

Relative Strength Index (RSI), a popular technical indicator, is used to determine whether an Option's price is too high or too low. The RSI fluctuates between 0 and 100. If the value is below 30, it means that the Option …

How many types of options spread ?

Option spreads are simultaneous buy and sell of options for the same asset. Spreads like this have different strike prices and expiration dates. There are many types of option spreads. Vertical spreads - An option spread that uses Options with …

When option spreads can be use ?

An Option spread is created by a trader who simultaneously takes two positions at BUY or SELL of an option of the same asset. The expiration and strike prices of the Options chosen are different. Option spreads that involve Call …

What does collar option strategy means and when we should use it ?

If you own shares of a company and need to protect them from any sharp declines in price, a collar can be used. It involves the sale of a Call Option and purchasing a Put. Maximum Loss = Purchase of …

What does Naked options or uncovered trading means ?

Uncovered options trading allows you to sell an Option and not hold any position in the underlying. This is also known as naked options trading. A trader can sell an Option without the shares of the underlying. A naked or …

What does an option spread means ?

Option spreads are a fundamental building block for option trading strategies. Option spreads are created when you simultaneously buy and sell options with the same expiry and underlying. Different strike prices are used for different options. Spreads made with Call …

What does Bear Call Spread means and when it should be used ?

A Bear Call Spread strategy involves buying Call Options and simultaneously selling Call Options. This strategy is also known as the bear credit spread. This strategy can be executed by buying 1 OTM call and selling 1 ITM call with …

What does Bull Call Spread strategy means and when it should be used ?

Bull Call Spread is a strategy that allows you to take two positions: buy a Call or sell a Call option. You buy 1 ITM Call Option, and sell 1 OTM Option. You can buy 1 lot at ITM of …

What does Paired Option Contracts mean ?

Paired options contracts allow you to hold 2 positions on the same Option with the same strike price and expiration. It consists of 2 legs: a Call option as well as a Put option with the same expiry and strike …

Is there any best strategy for options trading ?

There is no best strategy for options trading. One man's sweet may be another's poison. When drawing your option strategy, you should consider the following: Market Outlook - It doesn't matter if it's bearish, bullish or neutral. Your risk appetite …

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