Bullish Option Trading Strategies
Long Call – Buy Calls in a Bullish market with at least 45 day until expiration.
Entry Rules
Bullish expectations for the underlying asset.
Low Implied Volatility resulting in cheap options.
More on Buying Call Options
Bull Call Spread – Buy ATM (lower strike price) Call and sell OTM (higher strike price) Call with 45 days or greater until same expiration date in moderately Bullish markets that are trending up.
Entry Rules
Bullish expectations for the underlying asset.
Pay no more than $2 for a $5 spread, and $4 for a $10 spread, including commissions.
More on Bull Call Spreads
Bull Put Spread – A credit spread buying OTM (lower strike price) Put and selling ATM (higher strike price) Put with 30 to 90 days until same expiration date in moderately Bullish markets that are trending up. The benefit to this credit spread is that you keep the credit if the options expire worthless.
Entry Rules
Bullish expectations for the underlying asset.
Take in a net credit of at least $3 for a $5 spread, and $6 for a $10 spread, after commissions.
More on Bull Put Spreads
Diagonal Bull Call Spread – This trade is a combination of a Bull Call Spread and a Call Calendar Spread. Buy ATM (lower strike price) Call with 60 days or greater to expiration. Sell OTM (higher strike price) Call with at least 30 days until expiration and at least 30 days less until expiration than purchased Call. This is a good trade to do with LEAPS in combination with short-term options.
Entry Rules
Bullish expectations for the underlying asset, but you don’t expect stock price to move too quickly.
Pay no more than $4 for a $5 spread, and $8 for a $10 spread, including commissions.
Implied Volatility Skews of sold Call at least 10% greater than purchased Call.
More on Diagonal Bull Call Spreads
Bullish Call Ratio Backspread – Sell lower strike Calls and buy a greater number of higher strike Calls (1 to 2 or 2 to 3) in a market with a reverse volatility skew where you anticipate a sharp price rise with increasing volatility. Look for even or net credit trades where possible on options with greater than 90 days until expiration.
Entry Rules
Strong long term Bullish expectations (possible breakout) for the underlying asset.
Low Implied Volatility resulting in cheap options.
Enter at break even or a credit.
More on Bullish Call Ratio Backspreads
|
