Options can be highly profitable for investors, but difficult for beginners to master. To help you better understand the characteristics and implication of each, we've broken down the key Options strategies
- Buying Options for Leveraged Returns
- Income or Insurance for Stock Investors
- Net Debit Vertical Spreads
- Crafting a Profit Range Using Three Legs
- Glossary of Options Terms
Buying Options for Leveraged Returns
Long Call (Bullish)
The strategy is to buy call options with the expectation that the stock price will rise before expiration, then sell them for a profit. It’s a way to profit from a stock’s growth without the up-front capital outlay and risk of owning the stock; the trade-off is that the rise must happen prior to expiration. Investors might also exercise in-the-money call options to purchase stock at a discount from market value.
Long Pull (Bearish)
The strategy is to buy put options with the expectation that the stock price will decline before expiration, at which point the investor could sell them for a profit. It’s a way to profit from a stock’s decline without the unlimited risk and margin requirements of selling the stock short; the trade-off is that the decline must happen prior to expiration...