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Getting Started With Options
Buy A Call
Use this strategy when you are very bullish the market. The more bullish you are the further out of
the money (higher strike price) you can buy. No other position can give you as much leverage with
unlimited profit potential and limited downside risk.
Sell A Call
Use a Short Call Option strategy when you believe the market is NOT going up. The strength of your
belief determines at what strike price you should sell.
Buy Put A, and Sell Put B (Lower Strike Price)
Use the Bear Put Spread when you think the market will go down but are unsure of how low, or if you
think the market will go down and the straight put option position is very expensive and you want to
be able to get an option with a closer strike price.
Buy Call A, Sell Call B (Higher Strike Price)
Use the Bull Call Spread if you think the market will go up, but are unsure of how high, or if you think
the market will go up and the straight call option position is very expensive and you want to be able
to get an option with a closer strike price.
Buy 1 At The Money Call, Sell 2 Or More Out Of The Money Calls.
Use the Call Ratio Spread when you expect the market to make a slight up move but there is
potential for the market to make a significant down move. The objective is to put this trade on as a
credit, a free trade or at least very cheap.
Sell 1 At The Money Call, Buy 2 Or More Out Of The Money Calls
Use the Call Ratio Back Spread when you expect the market to make a substantial up move after a
period of stagnation; the objective is to put the trade on as a credit, a free trade or at least very
cheap.
Buy 1 Put, Sell 2 Puts Further Out, Buy 1 Put Further Out
You use the Long Iron Put Butterfly when you expect the market to be range-bound, or make a small
down move, but not go beyond a specific point.
Buy An At-The-Money Put & Call (Same Strike Price)
Use the Long Straddle when you think the market will move sharply up or down, but don’t know
which direction to expect. This is a good strategy to use when the market has been flat or trading in
a narrow range, and you expect a news event or weather pattern to change the conditions of the
market.
Buy An Out-Of-The-Money Call, And Buy An Out-Of-The-Money Put
Use a Long Strangle when the market is range bound, and you expect:
1. The market to break out of the range
2. To make a large move
3. And when you don’t have a clear idea of which side to expect the breakout.
Sell 1 At-The-Money Put, And Buy 2 Or More Out-Of-The-Money Puts
Use the Put Ratio Back Spread when you expect the market to make a substantial down move after
a period of stagnation or expect a trend reversal. The objective is to put this trade on as a credit, a
free trade or at least, very cheap.
Sell An At The Money Put And Call (Same Strike Price)
Use a Short Straddle when you think the market will not move sharply in either direction. You are
looking to profit from a flat market.
Sell An Out-Of-The-Money Call, And Sell An Out-Of-The-Money Put
Use this strategy when the market is range bound and you expect it to stay in the range, and fail to
make a large move prior to option expiration.
Buy A Put
Use the Long Put Option strategy when you are very bearish the market. The more bearish you are
the further out of the money (lower strike price) you should buy. No other position can give you as
much leverage with unlimited profit potential and limited risk.
Do you know which
30 minute period of
the trading day is
most likely to see an
increase in prices?
Did you know which
month the NASDAQ
typically under
performs relative to
the rest of the year?
Join CTS To learn
these and other
trading facts that can
help make you a
successful trader.
Futures Traders Helping Future Traders
