4. A financial derivative that represents a contract
sold by one party (option writer) to another
party (option holder).
The contract offers the buyer the right, but not
the obligation, to buy (call) or sell (put) a
security or other financial asset
The price has been agreed-upon( the strike
price)
Transection takes place during a certain period
of time or on a specific date (exercise date).
12. Bullish strategies in options trading are employed when the options
trader expects the underlying stock price to move upwards.
WHY USE BULLISH STRATEGIES?
● Negative Effects Of Time Decay
● Alternative Approaches
● Unique Characteristics
● Level Of Risk
DISADVANTAGES
● Investment
● Potential Profits Are Limited
● Based On Relatively Short Term
● To Choose The Right Strategy
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20. Bearish strategies in options trading are employed when
the options trader expects the underlying stock price to
move downwards.
WHY USE BEARISH STRATEGIES?
•Limiting lose
• Negative effects of time decay.
• Generate profit.
DISADVANTAGES:
• Limited profit potential
• Number of different strategies
• Takes extra time and effort to decide best one for any situation.
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25. Neutral options trading strategies are employed when the
options trader does not know whether the underlying
stock price will rise or fall.
WHY USE NEUTRAL STRATEGIES?
• The biggest advantage is that they exist.
• Profit from three different outcomes.
• Prolonged periods of being neutral, gives options traders
chances to generate returns
• Can turn time decay into positive
• Can control your risk exposure to some extent.
DISADVANTAGES: The biggest drawback is that the
potential profits of these is always limited, also the
strategies all require at least two transactions.
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34. • We come to conclude that option strategies are either
buying or selling of option and often are basically a
simultaneous buying and selling of one or more then one
option with the help of which we are able to reduce our
risk and increase the potential of profit in all three
condition when a trader speculate:
• A)increase in price
• B)decrease in price
• C) consistent