Introduction To Bullish Options Trading Strategy

Bullish options strategies are simply policies that are adopted by several traders when they expect to see a rise in asset price.
It is essential to determine how much the underlying price will move upwards and the timeframe in which the rally will take place in order to choose the best options strategy.
Buying call options in a simple policy gains benefit on the rising market, but if a trader has failed to cover their position for any unexpected and major price fall, it will increase many risks for a trader.
Moreover, it is also not an intelligent policy to acquire while the market is somewhat bullish. Instead of stepping on buying a call, traders should enter a bull call spread strategy.
A bull call spread strategy is a trading strategy that several traders adopt when price rise is modest in the market.
This strategy uses two different types of call options to create a range, one call option with a fewer strike price and another call option with a higher strike price.
Using this strategy stops the trader from earning a profit, but it also safeguards and prevents them from losses.
Traders can purchase a simple call option to gain benefit from rising stock prices against a premium. The premium is calculated based on the strike price and the current price of the security.
If both the strike price and current price are nearby to each other in terms of value, the premium will be high. When the price rise, the buyers can perform their rights to buy stocks at the strike price.
But if in case the stock price remains unchanged or falls, they can reduce their losses by only falling the premium value of the option.
When the premium price is upwards, it might offset the gain from the stock price rise.
Besides, they will also have to pay brokerage to the agent that will also add brokerage to the cost of the spread.
Unless the stock price goes significantly high above the break-even point, buying a call option will lower down your gain from the deal.
The break-even of a certain stock price is equal to the premium paid plus the stock price.

A trader can enter into various bullish options strategies for a bullish market depending on the strength of the bullish pull.
However, there are nine different and commonly used bullish options strategies given below:

• Long call

Buying a call is the most basic and simple of all options strategies. It develops the first options trade for an individual who is already well versed with buying and selling stocks and would now want to trade options.
Buying a call strategy is simple to understand. When you buy a call, it means you are bullish. Buying a Call means you are very bullish, and you’re expecting the underlying index or stock to move upward in the future.

• Short put

Short put means an investor is ready to buy an underlying asset at a calculated price in the future date. An investor will gain benefit if the price rise in the future.
However, applying this strategy contains risk because it involves purchasing the physical asset, which later on increases their risk volume.

• Bull call spread

It means an investor is buying an in-the-money (ITM) call option and selling another out-of-the-money (OTM) call option.
The premium is majorly collected from selling a call option is used to balance the premium paid for the long call.

• Bull put spread

Bull put spread needs two transactions that are buying one bull put and simultaneously selling another. However, it is considered a complicated strategy because of the high stakes involved, which is clearly not recommended for all beginners.

• Bull ratio spread

Bull ratio spread delivers more flexibility, but it seems like a complex strategy. Bull call spread involves two calls, i.e., buying and writing to spread in a ratio.
Usually, an investor sells more than what he/she buys. Using this strategy, they can profit even when asset price decreases or there is no expected rise.
But this strategy is recommended and suits more experienced traders and not for new investors.

• Short bull ratio spread

Traders can enter into a short bull ratio spread when they have faith and are pretty confident that asset price will significantly move upwards but also at the same time have the courage to cover for any loss in case the price falls.
It involves two transactions of writing calls and buying calls with a lower strike rate for the same underlying and expiration date.

• Bull butterfly spread

Bull butterfly spreads consist of two types, i.e., call bull butterfly and put bull butterfly. However, a bull butterfly is a complex strategy that creates a debit spread and involves three transactions.

• Bull condor spread

There are two different types of bull condor spread, i.e., call and put condor spread. This strategy creates a debit spread around four different transactions.
Several traders apply it to minimize the cost, which is upfront and optimize profit when they are confident that security prices will move upward to their level of expectation.

• Bull call ladder spread

Bull call ladder spread consists of buying one call and writing two calls simultaneously, containing different strikes.
Traders can also enter at various times into a leg by trading the call options to gain profit.

• What Is A Bullish Options Trading Strategy?

Bullish options strategies are simply policies that are adopted by several traders when they expect to see a rise in asset price.

• What does bull call spread strategy means?

It means an investor is buying an in-the-money (ITM) call option and selling another out-of-the-money (OTM) call option.

• What does Short put strategy means?

Short put means an investor is ready to buy an underlying asset at a calculated price in the future date. An investor will gain benefit if the price rise in the future.