What Bullish Options Strategies are the best
Bullish Options strategies are used by traders who expect a large upward move in a stock. The trader thinks that the stock price will go up much.
The trader expect that the company will show a good earning report they will use a bullish strategy. There are several strategies like long call, selling a put, will discuss several bullish options strategies and their probabilities.
Long Call Options a bullish options position
The Long Call Options strategy is the simplest bullish options trading strategy and the most commonly used.
A long call strategy is simply buying a long call option. The breakeven is above the strike price. It is the strike price plus the premium that you have paid.
The price price of the underlying needs to increase a lot that is above the breakeven price before you make a profit. In theory you can have a big gain. Not often a stock makes a big move in your favor.
Your maximum loss is the premium you paid for the option.
Writing a Naked Put a bullish options position
The best way to setup a bullish options position is to sell a naked put. Selling is the same as writing. Writing a naked put is when you sell a put option without first having a short position in the stock. What “naked” means in this case is that you are selling an option where you do not have a position to cover the option.
The breakeven price of the position is the stricke price minus the premium received. In this way you you increase the probability of profit.
If the stock rises and the option expires out of the money, you will take the whole price of the option as a profit.
You can also make money by writing a naked put option even if the price of the stock remains neutral. This is because of the time decay quality of options contracts. When writing an option, you benefit from the time decay of the option, meaning that the value of the option you sold will decrease as the expiration date nears. This decrease in value is your profit.
If the stock price falls a little and does not reach the break even price you are still in profit. Unless the stock moves down the breakeven you experience a loss.
Naked put options are never truly uncovered because all option trading brokers require you to have the money available to cover the option if it is exercised.