What are option trading strategies? Websters Dictionary defines
the term strategy as:
- a) the science of planning and directing larger scale military
operations, specifically (as distinguished from TACTICS) of
maneuvering forces into the most advantageous position prior
to actual engagement with the enemy.
b) a plan or action based on this.
- a) skill in managing or planning, especially by using stratagems.
b) a stratagem or artful means to some end.
When applying a definition to investing in the market, we want
to pay particular attention to the words maneuvering into the
most advantageous position prior to actual engagement and the
words skill in managing or planning especially by using stratagems.
Picking a stock or group of stocks is only half the battle.
Making the most from the chosen investment opportunity is the
other half. This is where your option trading strategies
The wrong option trading strategies even when applied to the
right opportunity can produce increased risk, decreased profits
and even potential loss. Therefore, understanding and applying
the proper option trading strategies is critical.
The actual selection of an investment opportunity from those
offered normally depends on the type and style of research the
investor favors and deems necessary.
This selection process for your option trading strategies is
a checklist of different types and pieces of data that are favored
by the individual investor. These pieces of data can consist
of charts, indicators, oscillators, fundamental analysis, news
or even tips.
Each investor has his/her own investment selection protocol.
As an investor, once you complete this process and choose your
investment opportunity, your option trading strategies take
over. Inherent in the selection of the stock is expectation.
Every investor has some expectation for any chosen opportunity.
Therefore option trading strategies must be selected which best
fits those expectations.
The proper option trading strategies will be the option trading
strategies that allow for the highest possible return with the
least amount of risk and the best possible protection that can
Obviously, since every opportunity will have a somewhat different
expectation along with different variables surrounding it, each
opportunity should have a different ideal option trading strategies
By and large, when choosing a stock to invest in, most investors
look to purchase a stock they think will go up. The directional
play is as good a place as any to start our discussion of option