Intermediate options trading strategies: how to profit from them

Options trading strategies such as spreads, straddles and strangles can open new opportunities

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When traders first start using options, they often employ them either as a way to take a directional view on an asset (buying a call if they expect it to rise or a put if they expect it to fall) or as a way to hedge their portfolio against market volatility. However, experienced traders can also go on to consider more complex strategies that involve buying or selling combinations of options. 

It is important to have a strong grasp of options trading principles before attempting this and to understand the risks involved in each position. Broadly speaking, bought options and long option strategies carry limited risk. The buyer pays the seller a premium that equals the maximum loss on any position expiring out of the money. Granted options and short options strategies (also known as sold options and written options) have the potential for unlimited maximum losses in some cases if the position expires in the money, and so very careful risk management is needed when employing some of these strategies.

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James has over 30 years of experience at CEO, MD and Board level with a focus on establishing, building and managing businesses for major international firms including the London Metal Exchange, JPMorgan, UBS, ED&F Man Group and John Swire & Sons. He has lived and worked in Hong Kong, Singapore and New Zealand, and has a degree in Chinese and Economics from London University’s School of Oriental and African Studies.