Options trading is one of the most complex yet flexible financial instruments in the stock market. But without proper strategies, the traders cannot make options strategy work in their favor and make a significant amount of profit; instead, they will quit. A survey report shows that 40% of traders quit trading within one month.
So, if you want to know how to choose the right options auto trading strategy, this guide will be helpful. It will discuss the different strategies with popular strategy builders, further explaining their pros and cons.
Explaining Different Types of Options Strategies
The options are mainly divided into two categories including call and put Options. They further have different sub-strategies that we will discuss below-
- Bull Put Spread
A bull put spread strategy is a popular strategy where the traders use two put options with the same expiration date of their assets and different strike prices to create a range. You may use an options strategy builder to create the strategy and adjust expiration dates and strike prices.
- Bull Call Spread
The bull call spread uses two call options with different strike prices to develop a range. In this case, both options will have the same assets with expiration dates. This specific strategy is helpful when the underlying assets’ price goes higher.
- Synthetic Call
The synthetic call is useful for investors when they hold a positive long-term outlook on the underlying assets but are concerned about potential risks. It involves purchasing put options of those specific underlying assets that are purchased via direct investment after getting a bullish view.
- Call Ratio Back Spread
It is a three-legged options strategy where the investors purchase two Out-Of-The-Money call options when selling only one In-The-Money call option. With the help of this specific strategy, you may receive more profit if the price of the asset goes up. But, your losses will be limited if the price remains in a specific range.
- Synthetic Put
Investors use the synthetic put when they predict that the market is currently in a bearish trend and that the strength of the underlying assets will reduce in the near term. However, if you are new, you can use the options strategy app to know if this strategy is the right choice for you. If it works for you, you may generate unlimited generate.
- Strip
The strip is another three-legged strategy where investors predict that the assets’ price either go higher or stay in the same position. The investors can do it by purchasing two put options and one call option with the same asset, expiry date, and strike price. Now, if the price falls at the expiration date, you may gain high profit with this strategy.
- Long and Short Strangles
The long and short strangles are popular in options trading. With a long and short strangle strategy, you need to buy one Out-Of-The-Money call option and put option. In the long strangle strategy, the losses are limited to the premium while profit is unlimited. But, in short strangles, the loss is unlimited while the profit is similar to the received premium.
- Long and Short Iron Condor
The iron condor strategy is a four-legged strategy that includes one short and long put with one short and long call. If it seems confusing and you want to know whether it is the right strategy for you, consider using options bot templates. However, in the long and short iron condor, the profit potential is much higher for the investors.
- Long and Short Butterfly
This specific strategy is a blend of bear and bull spreads with fixed risks and limited profit. In a long butterfly strategy, you need to buy one In-The-Money call option and sell two At-The-Money call options, further purchasing one Out-Of-The-Money call option. Contrary to that, the short butterfly involves selling only one In-The-Money call option, purchasing two At-The-Money call options, and again selling an Out-Of-The-Money call option.
5 Best Options Strategy Builders that You Must Know
Do you want to choose the right options algo trading strategy quickly? You can do it by using popular options strategy builders. Here are some of the most popular options for strategy builders.
1: SpeedBot
One of the most popular options strategy builders is SpeedBot which validates your strategies without risks. The features of this strategy builder are time-based options trading strategies, detailed backtesting reports, Monthly and weekly expiry, defining multi-leg orders, etc.
Pros:
- User-friendly and affordable
- It has a powerful algorithm
- It offers the best advanced features
Cons:
- Could work more in providing real-time data
2: E*TRADE Financial
The E*TRADE Financial is an options strategy builder that is helpful for both beginners and experts. With it, traders can access tools and massive databases to enhance their trading skills. You just need to invest $5000 to use it to learn how to trade options.
Pros:
- User-friendly platform
- Excellent customer support
- Feature-rich platform
Cons:
- It is a bit expensive for some users
3: Fidelity Investments
Fidelity has gained popularity because of its advanced tools and research reports. With it, the users can maximize their investment portfolios. To use this, you need to deposit $2000. Then, you will get access to different features to start trading.
Pros:
- Commission-free options trading
- Wide selection of research providers
- Great customer support
Cons:
- It is not affordable
4: Ally Invest
You can use this specific options strategy builder if you are a beginner. It is an easy-to-use platform with various tools including analytics, data, charts, etc. The best part is that you do not need to invest any minimum payment to use it.
Pros:
- There is no minimum investment
- Powerful web-based platform
- Best for beginners
Cons:
- Limited third-party research provider
5: Lightspeed
If you are searching for one of the best options strategy builders that is powerful and reasonable, look no further than Lightspeed. But, it is worth noting that this is not built for beginners because it lacks user-friendliness. However, to use this, you have to make a minimum payment of $2000.
Pros:
- Low options trading cost
- An advanced trading platform
- It has several features
Cons:
- It is not suitable for beginners
Conclusion
The traders can use the options strategies to take full advantage of falling and rising prices of stocks. You just need to use the most suitable options strategy builder that can help you know how to do options trading with confidence.
