Options are versatile trading vehicles that allow investors to profit in a wide variety of trading environments. After having mastered call and put buying, many options traders find themselves anxious to move on to more complex options-trading strategies. They might, for example, find that selling a put or a call is an appropriate course of action for a given situation. Or, they may choose to employ a combination strategy involving both the buying and selling of puts and calls on a stock.
In the following section, we will look at strategies such as credit spreads, which allow an investor to generate income on a stock while reducing risk associated with that position. On the other hand, a straddle position would allow an investor to profit from a strong rally or a sharp drop in the underlying security. The only requirement for a straddle is that the underlying security move sharply during a specific period of time.
By learning more complex option strategies, an investor expanding his trading arsenal, enabling him to take advantage of more opportunities in the market as they present themselves.
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