BEST OPTION STRATEGY


 

 

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BEST OPTION STRATEGY

 Let's say that you've been watching a particular commodity and now have a hunch as to where prices might be going. You may have formed this hunch based on a news article or industry report, or perhaps a buy or sell signal was generated by a trading system based on the price movement of the underlying instrument. Let's also say that you have some risk capital set aside. Of the option buying strategies described in this site, how do you decide which is the best? The answer depends upon by how much do you expect prices to move and when. The more precise are these answers, the better you'll be able to select an appropriate strategy. The flow chart below provides a general guideline.

Once you have decided upon the appropriate option-buying strategy, you can find information on executing the buy transaction and managing the trade under Option Transaction and Option Position found under the section, General Topics, on the home page.

Are you BULLISH or BEARISH?
BULLISH

Are you expecting a moderate or
an historically large price rally?

MODERATE LARGE

Will this happen within 6 weeks or so?

LIKELY NOT SURE LIKELY NOT SURE
BEARISH

Are you expecting a moderate or
an historically large price decline?

MODERATE LARGE

Will this happen within 6 weeks or so?

LIKELY NOT SURE LIKELY NOT SURE

 

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Keywords: best option strategy, select option strategy, calls vs puts
Abstract: Calls vs Puts? Strike Price? Maturity? This flow chart will help you choose the best option strategy.