Understanding
Stock Options Trading
and Technical Analysis Basics

Neutral Non-Volatile Option Strategies

The strategies on this page are considered neutral, as the maximum profit is obtained if the underlying stock does not change much in price. These trades are usually placed with an expiration date in the near future. Therefore the underlying stock price will need to remain stable in the short term.

While the price of the underlying stock can fluctuate a little, these neutral strategies require the stock price to stay within a trading range that does not move.

Click the links for each strategy in order to see more detailed descriptions and examples.

 

Call Ratio Spread

A Call Ratio Spread is a strategy with very little initial outlay that involves buying 1 in-the-money call and selling 2 at-the-money calls. It is a neutral strategy for low volatility stocks. You reach maximum profit if the stock price doesn't move. You incur unlimited losses if the stock price climbs too high.

Call Ratio Spread - Buy 1 ITM Call, Sell 2 ATM Calls

Long Butterfly

A long butterfly involves buying an in-the-money call, selling 2 at-the-money calls and buying an out-of-the-money call. It is a neutral low-risk strategy for low volatility stocks. You reach maximum limited profits if the stock doesn't move much. You will incur maximum limited losses if the stock climbs too high or falls too low.

Long Butterfly - Buy 1 ITM Call, Sell 2 ATM Calls, Buy 1 OTM Call

Iron Butterfly

A long iron butterfly is a credit position and involves opening a call spread (sell at-the-money call and buy out-of-the-money call) and a put spread (sell at-the-money put and buy out-of-the-money put). It is a neutral low-risk strategy for low volatility stocks. You reach maximum limited profit if the stock doesn't move. You will incur maximum limited losses if the stock climbs too high or falls too low.

Long Iron Butterfly - Buy 1 OTM Put, Sell 1 ATM Put, Sell 1 ATM Call, Buy 1 OTM Call

Iron Condor

A Long Iron Condor involves creating an out-of-the-money bearish call spread and an out-of-the-money bullish put spread. It is a neutral low-risk strategy for low volatility stocks. You retain limited credit income if the stock price remains inside a price range. You will incur limited losses if the stock climbs too high or falls too low.

Long Iron Condor - Buy 1 further OTM Put, Sell 1 OTM Put, Sell 1 OTM Call, Buy 1 further OTM Call

Put Ratio Spread

A Put Ratio Spread has very little initial costs, and is created by buying 1 in-the-money put and selling 2 at-the-money puts. It is ideal for neutral non-volatile stocks. Maximum profit is reached if the stock price doesn't move. Unlimited losses are incurred if the stock price falls too low.

Put Ratio Spread - Sell 2 ATM Puts, Buy 1 ITM Put

Short Strangle

A short strangle is a neutral strategy for stocks that do not move much. It is created by selling an out-of-the-money call and selling an out-of-the-money put with the same expiration date. It provides an initial credit premium, which will be your profit if the stock stays within the 2 strike prices. If the stock climbs or falls beyond these strike prices, losses can be unlimited.

Short Strangle - Sell 1 OTM Put, Sell 1 OTM Call