Understanding
Stock Options Trading
and Technical Analysis Basics

Advanced Options Strategies Guide

Before continuing, we need to emphasize that options represent a higher-level form of investment, and carry a much higher amount of risk. As such, investors are advised to thoroughly understand and learn how to trade options before investing, and to only invest with risk capital.

Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options (ODD). Copies of the ODD are available from your broker, by calling 1-888-OPTIONS, or from The Options Clearing Corporation, One North Wacker Drive, Suite 500, Chicago, Illinois 60606.

Summary:

Stock options are more complex and risky than stocks. Carefully study and learn how to trade options before applying these advanced options strategies. Also, only invest with money that you can afford to lose.

This guide assumes that you already have a basic understanding of the fundamentals of option trading, such as buying and selling calls and puts. If you wish to read up on the foundations of option trading, do check out our Option Basics Guide.

In essence, every option strategy - no matter how complicated they are - comes down to a combination of buying and selling call and put options at various strike prices and exipration dates. Different combinations of these basic building blocks of option trading are used to suit the investor's risk profile and market outlook.

Are you bullish, neutral or bearish on a particular stock? Are you prepared to risk more or prefer a more conservative strategy? Do you prefer to monitor your trades daily or buy a position and wait till expiration? Whatever your preferences are, there's an option strategy for you. This guide will cover some of the more advanced options strategies such as butterflies and iron condors.

Topics covered in this guide: