Options trading strategies
Options can be used in isolation, or in combination with other options or with stock to construct a wide range of strategies. The discussion of each strategy covers:
- How the strategy is constructed
- The market outlook for which the strategy may be appropriate
- Potential profits and losses
- Follow-up action required
- The effect on the strategy of time decay and changes in volatility
An example of each strategy is also included.
ASX also produces a poster with a summary of the most widely used strategies for various different market conditions. ASX Options strategies poster (PDF 100KB).
- Long call
- Bull spread
- Protected covered write or Collar
- Ratio call spread
- Stock repair
- Protected put
Strategies for price breakouts
Tailor made combinations
Since the introduction of Tailor Made Combinations (TMC), combination orders now automatically interact with the individual component series. This increases the chance these orders will be exectued at the best possible in total.
The Strategy Library is not intended to cover every possible options strategy, but to explain the more popular strategies. It is assumed that you are familiar with option pricing fundamentals, and the concepts of delta and time decay. For an explanation of basic option concepts, please refer to the About Exchange Traded Options (ETOs) section. Note that for the purpose of simplicity, transaction costs, tax considerations and the cost of funding are not included in the examples.
The information contained in these webpages is for educational purposes only and does not constitute financial product advice. ASX does not represent or warrant that the information is complete or accurate. You should consider obtaining independent advice before making any financial decisions. To the extent permitted by law, no responsibility for any loss arising in any way (including by way of negligence) from anyone acting or refraining from acting as a result of this material is accepted by ASX.