Bullish Options Strategies: You Must Know Everything

You might know that bullish investors are interested in the upward movement of asset prices. Such investors must have a definite bullish option strategy to earn returns. You can also use multiple bullish strategies to earn returns through options. Beginners in the market often ignore the power of options and other derivatives. As a result, they fail to implement effective hedging or diversification strategies. Continue reading to learn the best strategies for investors.

Topics Covered:

• What are Bullish Options Strategies?
• Which are the Best Bullish Options Strategies?
• Conclusion

What are Bullish Options Strategies?

Before delving deeper into bullish options strategies, it is essential to understand the Basics of Options Trading . An option allows you to buy or sell the underlying asset at a predetermined price, known as the strike price. The quantity of the underlying asset and the option's expiration date are also predetermined. You can buy/sell the underlying asset at the strike price when the option expires. You can also choose to ignore the option on the expiration date. 

Traders with this strategy hope for an increase in asset prices. When an investment strategy for trading options is based on the assumption of increasing prices, it is called a

bullish option strategy. It is critical for beginners not to distinguish options from futures. Unlike an option, a future contract will obligate you to take action on the expiration date.

Which are the Best Bullish Options Strategies?

• Investing in Call Options

  A simple strategy for bullish investors is to purchase call options from the market. A call option allows you to buy the underlying asset at a strike price on a future date. You have to pay a premium to the call options seller, also known as the cost of the contract. When the market price on the expiration date (spot price) exceeds the strike price, you make a profit. When the spot price is lower than the strike price, investors do not exercise the option contract. In such a case, the loss is limited to the premium paid to purchase the call option. This strategy is also known as the long-call option in the market.

• Selling Short Put Options

  Besides buying long call options, you can also sell put options to make a profit or implement a bullish option strategy. A put option gives the holder the right to sell the underlying asset at the strike price on a future date. By selling a short put option , you are expecting an increase in the asset’s price. When the spot price is more than the strike price, the holder of the short put option will not exercise the contract. Your profit is limited to the premium collected on selling the short put option. However, you can suffer potential losses when the spot price falls below the strike price on the expiration date.

• Call Spreading

  Many bullish investors purchase a call option with a lower strike price and sell another with a higher strike price. The expiration date of both the call options must be the same for better results. When the asset’s price goes beyond the strike price, you get to keep the premium collected by selling the call option earlier. You can also exercise the call option with a lower strike price to get the same asset at a lower price.

• Put Spreading

  This bullish option strategy involves selling a put option with a higher strike price and purchasing another with a lower strike price. It is crucial to note that the expiration date of both contracts will be the same. When the stock price goes beyond the lower strike price, you make a profit.

• Butterfly Condor Spreading

  This strategy involves purchasing multiple call options with different strike prices. However, the expiration date for different call options remains the same. It allows investors to make profits even with short price movements.

  Additionally Read: About Demat Account

• Call Ladder Spreads

  It involves selling multiple call options at different strike prices (usually middle and higher strike prices). You must also purchase a call option with a lower strike price and the same expiration date as others. While this strategy helps earn profits with rising profits, it also opens doors to unlimited potential losses.

Conclusion

Novices or new investors must focus on building a definite bullish option strategy. It will allow them to make profits even when the asset prices are rising in the market. Investors can also adopt some strategies for bullish markets and make profits on declining asset prices. Start implementing the best bullish option strategies now! And don't forget to open a demat account to begin your journey into options trading with ease and convenience.