There are numerous option strategies, typically categorized into basic, intermediate, and advanced strategies. The exact number depends on how strategies are defined and variations combined. Here’s a broad classification:
1. Basic Strategies
- Buying Calls: Bullish strategy aiming for stock price appreciation.
- Buying Puts: Bearish strategy hedging against stock declines.
- Selling Covered Calls: Generating income from owned stock.
- Selling Cash-Secured Puts: Generating income while potentially buying stock at a discount.
2. Intermediate Strategies
- Protective Put: Hedging by buying a put while holding the stock.
- Covered Straddle/Strangle: Selling call and put options with the same or different strike prices.
- Collar: Combining covered calls and protective puts for limited upside and downside risk.
3. Spread Strategies (Directional and Neutral)
- Vertical Spread: Buying and selling options at different strikes, same expiration.
- Bull Call, Bear Put, Credit Spread, Debit Spread.
- Horizontal Spread (Calendar Spread): Different expiration dates, same strike price.
- Diagonal Spread: Different strike prices and expiration dates.
4. Advanced Strategies
- Straddles: Buying call and put at the same strike, expecting volatility.
- Strangles: Buying call and put at different strikes, expecting significant movement.
- Butterfly Spread: Combining long and short options for low-volatility environments.
- Iron Condor: Neutral strategy using two spreads for limited profit/risk.
- Iron Butterfly: Similar to Iron Condor with overlapping strikes.
5. Exotic and Specialized Strategies
- Box Spread: Combining bull and bear spreads for arbitrage.
- Ratio Spreads: Selling more options than bought for high risk/reward profiles.
- Ladders and Condors: Multi-leg strategies for fine-tuned risk/reward.
Estimated Total: With variations and custom combinations, there are 30–50 unique option strategies, though most traders focus on a subset of 10–15 commonly used ones.
