11 Options Trading Strategies That Pro Traders in Australia Love

11 Options Trading Strategies That Pro Traders in Australia Love

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When it comes to options trading, there are a variety of strategies that professional traders can use to make profits. In this article, we will look at some of the most popular options trading strategies that pro traders love.

The Long Straddle

This strategy is used when a big move in the underlying security is expected but is unsure which direction the move will go. The trader buys both a call and a put option with the same expiration date and strike price with a long straddle. If the security moves in either direction, the trader profits.

The Covered Call

Traders use this strategy when they are neutral about the price direction of the underlying security but want to profit from it. With this strategy, the trader sells call options against their existing shares. This limits an investor’s upside potential because they are giving up some of their gains on the stock; however, since most investors tend to focus on avoiding losses rather than taking profits, plenty of traders use this strategy successfully over time.

The Ratio Write

With this type of trade, the trader writes more call options than cash or stock on hand to limit their risk exposure. This strategy is typically used when an investor thinks that the security will remain flat for some time but does not want to miss out on any upside potential if it makes a significant move higher.

The Iron Condor

Traders use the Iron Condor when they expect a low volatility environment and are designed to profit from a price move in either direction. The trader sells both a call and put option with different strike prices and expiration dates with this strategy. If the underlying security moves in either direction, the trader profits.

The Bullish Butterfly

With this strategy, the trader buys one call option at a higher strike price, writes two call options at a lower strike price, and buys one put option at a lower strike price. If the underlying security moves in either direction, the trader profits.

The Bearish Butterfly

With this strategy, the trader buys one put option at a higher strike price, writes two put options at a lower strike price, and buys one call option at a lower strike price. If the underlying security moves in either direction, the trader profits.

The Strangle

With this strategy, the trader buys one call option at a lower strike price and writes another call option at an even lower strike price. If the underlying security moves in either direction, the trader profits.

Synthetic Long Positions

Another popular options trading strategy that pro traders use when they are not confident about predicting whether an investment will go up or down is a synthetic long position. With this trade, rather than purchasing shares of stock outright (Long Stock), you purchase a put option on that same stock and sell a call option against it. If the underlying security moves in the desired direction, you profit from the call option; if it moves in the opposite direction, you profit from the put option.

Synthetic Short Positions

With this trade, rather than purchasing shares of stock outright (Short Stock), you purchase a call option on that same stock and sell a put option against it. If the underlying security moves in the desired direction, you profit from the put option; if it moves in the opposite direction, you profit from the call option.

The Protective Put

The protective put is a popular options trading strategy that pro traders use to protect their stock holdings from downside risk. With this strategy, the trader buys a put option on their stock holding and pays for it by borrowing shares of the same stock. If the underlying security moves in the desired direction, the trader profits from the put option; if it moves in the opposite direction, the trader returns the stock they borrowed.

Rolling Options Positions

With this trade, you sell an existing option position and buy a new one with a different strike price and expiration date. If the underlying security moves in your favour, you can continue to roll the options positions until the underlying security reaches a level where it no longer makes sense to do so.

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