This document discusses different option trading strategies. It defines what an option is and explains bullish, bearish, and neutral strategies. Bullish strategies are used when traders expect prices to rise. Bearish strategies are employed when prices are expected to fall. Neutral strategies can profit from prices staying the same or moving in either direction. The document analyzes the advantages and disadvantages of each type of strategy and concludes that option strategies allow traders to reduce risk and increase profit potential regardless of the market direction.

1. OPTION STRATEGIES
MUQADDAS JELANI
MARIAM LATIF
TOOBA NAVEED
JAVERIA VOHRA

3. WHAT IS AN OPTION ?

4.  A financial derivative that represents a contract
sold by one party (option writer) to another
party (option holder).
 The contract offers the buyer the right, but not
the obligation, to buy (call) or sell (put) a
security or other financial asset
 The price has been agreed-upon( the strike
price)
 Transection takes place during a certain period
of time or on a specific date (exercise date).

7. Option Premium
Possibility of non-exercise option

8. Example of call option:

9. Example of call option:

10. Example of call option:

12.  Bullish strategies in options trading are employed when the options
trader expects the underlying stock price to move upwards.
 WHY USE BULLISH STRATEGIES?
● Negative Effects Of Time Decay
● Alternative Approaches
● Unique Characteristics
● Level Of Risk
 DISADVANTAGES
● Investment
● Potential Profits Are Limited
● Based On Relatively Short Term
● To Choose The Right Strategy

20. Bearish strategies in options trading are employed when
the options trader expects the underlying stock price to
move downwards.
WHY USE BEARISH STRATEGIES?
•Limiting lose
• Negative effects of time decay.
• Generate profit.
 DISADVANTAGES:
• Limited profit potential
• Number of different strategies
• Takes extra time and effort to decide best one for any situation.

25.  Neutral options trading strategies are employed when the
options trader does not know whether the underlying
stock price will rise or fall.
 WHY USE NEUTRAL STRATEGIES?
• The biggest advantage is that they exist.
• Profit from three different outcomes.
• Prolonged periods of being neutral, gives options traders
chances to generate returns
• Can turn time decay into positive
• Can control your risk exposure to some extent.
 DISADVANTAGES: The biggest drawback is that the
potential profits of these is always limited, also the
strategies all require at least two transactions.

34. • We come to conclude that option strategies are either
buying or selling of option and often are basically a
simultaneous buying and selling of one or more then one
option with the help of which we are able to reduce our
risk and increase the potential of profit in all three
condition when a trader speculate:
• A)increase in price
• B)decrease in price
• C) consistent