For new option traders, the various amount of options strategies can be overwhelming because they are not sure what each strategy represents—Iron Condor, Straddle, Strangle, Covered Call, Protective Put, Collar, Triple Lindy. Ok, the last one isn’t real, but it is a great scene from Back to School. The below infographic showing both portfolio protection options strategies and yield(income) enhancing options strategies should help.
Options trading can be a steep learning curve, but once you have a foundation, it can be the most useful tool in your investing toolbox. The best investors use options to hedge and increase returns in their portfolios. Download our free eBook Investors Love Options if you need a tutorial and workbook to get you started.
There are many instances where options can play a pivotal role in your portfolio. Trading options allows you to hedge individual positions or your portfolio as a whole. You can lower exposure to the stock market with minimal capital. Additionally, you can leverage upside exposure while also reducing your risk profile. Are you a dividend investor? Well, why not increase your yield by selling put and calls and generating additional income? Options can help you with all of this. There are so many helpful option strategies to choose from that we put this infographic together to help guide you. Choose an option strategy based on your outlook of the market or individual stock. Which directional exposure are you looking for? Hedging a stock to the upside and looking to reduce risk? You can Buy Puts or Sell calls and buy puts to form a collar position. Are you bullish and want to generate income or obtain additional exposure to a stock. Then sell puts or buy stock and sell calls to add income and lower your cost basis.
Options investors have more flexibility than long stock investors who can only express views through their purchase of stocks.