5. Different strategies available to Trade Options

We support 3 types of strategies to trade options as per below. You should understand the risk involved before using either one of the strategies.

1. Covered Calls

  • Covered call means you are selling another person the right to buy a stock which you already own, (reason why it is called "covered") during the course of the option contract at the strike price.
  • Covered calls are popular options strategy to generate income from option premiums.
  • Here the trader believes there will be just a slight increase and decrease in the underlying stock price for the life of the call option.

2. Covered Puts

  • Covered put means you are selling the underlying stock and selling a put option against it.
  • The risk with a covered put is that if it is exercised, then the option seller is obligated to buy 100 underlying stocks at the puts strike price.
  • Here the trader is anticipating a slow fall in the market price of the underlying stocks.

3. Vertical Spreads

  • A vertical strategy means simultaneously buying and selling options of the same type, that is calls or puts at different strike prices but with the same expiration.
  • Traders normally use this spread when they expect a slight move in the price of the underlying assets.
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