Professional options positions traders are always looking for new strategies to add to their toolkits. As a professional options position trader in Singapore, you have several advanced strategies to help you maximise your profits and minimise your risks.
The Covered Call
The covered call is a popular strategy among professional options position traders. It involves buying an underlying asset and then selling a call option on that asset. This strategy is convenient because it allows you to receive income from the sale of the call option while still owning the underlying asset.
If the price of the underlying asset increases, you will make a profit on both the sale of the call option and the appreciation of the underlying asset. However, if the underlying asset’s price falls, you will only lose money on the sale of the call option.
You can buy a put option while selling the call option to minimise your risk in a falling market, known as a covered call with a protective put.
The Protective Put
The protective put is a popular hedging strategy among professional options position traders. It involves buying a put option simultaneously with buying the underlying asset. This combination protects you from losses if the underlying asset’s price falls.
If the price of the underlying asset increases, you will make a profit on both the asset’s appreciation and the sale of the put option. However, if the underlying asset’s price falls, you will only lose money on selling the put option.
To minimise your risk in a falling market, you can sell a call option simultaneously by buying the put option, which is a protective put with a covered call.
The Collar
The collar is a popular hedging strategy among professional options position traders. It involves buying a put option and selling a call option on the same underlying asset. This combination protects you from losses in both directions.
If the price of the underlying asset increases, you will make a profit on the sale of the call option offset by the loss on the put option. However, if the underlying asset’s price falls, you will make a profit on the sale of the put option offset by the loss on the call option.
To minimise your risk in either direction, you can buy an out-of-the-money put option and sell an out-of-the-money call option, which is a collar with wings.
The Long Straddle
The long straddle is a popular strategy among professional options position traders. It involves buying a put option and a call option on the same underlying asset, protecting you from losses in both directions.
If the underlying asset’s price increases, you will make a profit on the sale of the call option offset by the loss on the put option. However, if the underlying asset’s price falls, you will make a profit on the sale of the put option offset by the loss on the call option.
To minimise your risk in either direction, you can buy an out-of-the-money put option and sell an out-of-the-money call option, which is a long straddle with wings.
The Long Strangle
The long strangle is a popular strategy among professional options position traders. It involves buying an out-of-the-money put option and an out-of-the-money call option on the same underlying asset. This combination protects you from losses in both directions.
If the price of the underlying asset increases, you will make a profit on the sale of the call option offset by the loss on the put option. However, if the underlying asset’s price falls, you will make a profit on the sale of the put option offset by the loss on the call option.
To minimise your risk in either direction, you can roll the put option, and the call option to new strikes as the underlying asset’s price moves, which is a long strangle with wings.
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