Option Strategies
Single Leg Strategies
Single-leg options strategies are straightforward trading approaches that involve either buying or selling a single type of options contract — either a call or a put — without combining multiple positions. These strategies form the foundation of more complex multi-leg strategies, yet they offer traders essential tools to express bullish, bearish, or neutral market views. Understanding single-leg strategies requires grasping key concepts such as option premiums, strike prices, expiration dates, and the underlying asset's movement.
Spread Strategies
Volatility Strategies
Spread strategies are options trading techniques that involve taking simultaneous positions in multiple options contracts to manage risk, limit potential losses, or enhance profit potential. Unlike single-leg strategies, spreads combine long and short positions in options of the same underlying asset. These strategies are widely used to express bullish, bearish, or neutral market views while controlling risk exposure and managing capital efficiently.
Spreads are typically constructed using two or more options contracts with differing strike prices, expiration dates, or both. The most common spread strategies fall into three categories: vertical spreads, horizontal spreads, and diagonal spreads. Each has distinct characteristics that traders apply based on their outlook, volatility expectations, and risk tolerance.
Volatility strategies in options trading are designed to profit from changes in market volatility rather than simply relying on directional price movement. Since options prices are heavily influenced by volatility, these strategies focus on exploiting shifts in implied volatility (IV), often with less concern about the underlying asset’s specific price direction. Volatility strategies are particularly useful during periods of uncertainty, earnings releases, or major economic events when volatility tends to fluctuate.