More complex options trading strategies can involve two or more “legs”. The bull and bear spreads in our simple options trading strategies section have two legs – you buy one option and sell another. You can buy more than one spread, but there will always be an equal number of buys to match the options you sold. As you learn how to trade options, you will probably hear the term “ratio spread”. These are options trading strategies with spread techniques that involve buying one option against the sale of two or more further from the money options or selling an option against buying two or more further from the money options.
As with other futures options trading strategies, these kinds of spreads are designed to create a positive risk to reward scenario. This means that you are trying to take the least amount of risk for the best possible profit potential. As you learn how to trade options, you will find that some option trading has unlimited risk potential paired with minimal profit potential, so being able to evaluate which options represent the best value is important.
Other more complex option trading strategies include: butterfly spreads, strangles, straddles, and condors. As you progress through our online trading course, you will learn what futures market conditions these complex trade designs are best suited for. Once you learn the more advanced option trading techniques you will have trading strategies for use against any futures market conditions.
As you learn how to trade options you will learn that advancing beyond simple options trading strategies, while possibly increasing risk, opens up option profit scenarios that do not require the market to move in a particular direction. There are futures options trading strategies which may take advantage of expanding or contracting volatility as well as basic price movement within the underlying futures market. These advanced techniques are beneficial to new and experienced traders alike.
Trading in futures and options involves a substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.
