Option trading strategies for beginners

1. Intro strategy

Options trading strategy is a method of investing where you buy a call option and sell a put option at the same time. When you do this, you have effectively bought a contract that gives you the right to purchase shares at a certain price (the strike price) within a specific period of time. You then sell a contract that gives you a right to sell those shares at a lower price than what they were purchased at. In essence, you are selling insurance on the stock. If the stock goes down, you make money; if it goes up, you lose money.

2. Put-Call Parity

Put-call parity states that if you own both a call option and a put option on the same underlying security, then the value of the options should be equal. This means that if you own a $100 call option and a $100 put option on the same stock, then the two contracts should be worth $200 each.

3. Delta Neutral

Delta neutral is a strategy that involves buying calls and puts based on their delta values. Delta refers to how much the option's premium changes per share change in the underlying asset. A higher delta indicates that the option is more sensitive to movement in the underlying asset. So, if you want to invest in stocks that tend to move less, you would choose a low delta option. Conversely, if you want to bet on stocks that move a lot, you'd pick a high delta option.

4. Gamma Neutral

Gamma neutral is similar to delta neutral except that gamma refers to how much the options' premium changes per percentage point change in volatility. Volatility refers to how much the price of the underlying asset fluctuates over time. So, if you're looking for stocks that don't move a lot, you might consider buying options with a low gamma. On the other hand, if you think the market is going to go up, you might want to look for options with a high gamma.

5. Vega Neutral

Vega neutral is similar to gamma neutral except that it focuses on how much the options' premiums change per percentage point change in implied volatility. Implied volatility is a measure of how much the option prices are expected to rise or fall. So, if you think the markets are going to stay calm, you may want to look for options that have a low vega. On the other hand if you think the market will become volatile, you might want to choose options with a high vega.

6. Iron Condor

An iron condor is a type of straddle trade where you simultaneously buy a call option and a long position in the underlying stock. An iron condor is named after the bird that hunts prey by flying above them and waiting until they are flushed out before swooping down and attacking.