Part 6 Learn Institutional Trading

Deep Dive into Option Strategies

One of the biggest advantages of options is the ability to combine them into structured strategies. Let’s expand on some common and advanced ones:

A. Single-Leg Strategies

These involve buying or selling just one option.

Long Call: Buy a call option expecting prices to rise.

Low risk (limited to premium paid).

High reward if stock surges.

Long Put: Buy a put option expecting prices to fall.

Best for bearish outlook.

Acts as portfolio insurance.

Short Call (Naked Call): Sell a call without owning stock.

You receive premium.

Unlimited risk if stock rises sharply.

Short Put (Naked Put): Sell a put option.

You receive premium.

Big risk if stock collapses.

B. Multi-Leg Strategies (Spreads & Hedging)

Bull Call Spread: Buy a lower strike call & sell a higher strike call.

Profits if stock rises moderately.

Lower risk than naked call.

Bear Put Spread: Buy higher strike put & sell lower strike put.

Works in moderately bearish markets.

Covered Call: Own stock + sell call option.

Generates steady income.

Capped upside potential.

Protective Put: Own stock + buy put option.

Insurance against stock falling.