Introduction

In the world of financial trading, options strategies can be a game-changer. They offer a way to mitigate risk, maximise profits, and navigate the market with confidence. This article delves into the top five neutral options strategies that can help you maintain a balanced portfolio, regardless of market fluctuations.

1. Iron Condor: The Iron Condor is a popular strategy amongst traders who prefer a non-directional approach. It involves the simultaneous selling of a call spread and a put spread. The goal is to profit from low volatility in the market. The Iron Condor is a relatively safe bet, as it limits potential losses while offering a decent return on investment.
2. Butterfly Spread: The Butterfly Spread is another strategy that thrives in a low-volatility environment. It involves buying and selling options at three different strike prices. The aim is to create a range of prices where the trader can make a profit, while limiting the potential for losses.
3. Straddle: The Straddle is a strategy that involves buying a call and a put option at the same strike price and expiration date. This strategy is ideal for situations where the trader expects a significant price movement but is unsure of the direction. The Straddle allows the trader to profit from either an upward or downward price movement.
4. Strangle: The Strangle is similar to the Straddle, but the call and put options are purchased at different strike prices. This strategy is best suited for situations where the trader expects a significant price movement and is willing to accept a higher risk for the potential of greater returns.
5. Covered Call: The Covered Call strategy involves selling a call option while simultaneously owning the equivalent amount of the underlying asset. This strategy is ideal for traders who expect the asset price to remain stable or decrease slightly. The Covered Call allows the trader to earn income from the premium received from selling the call option.

Iron Condor Trade Example

The Iron Condor strategy is a non-directional options strategy that is designed to earn a profit when the underlying asset is not expected to make large price movements. It involves selling a call spread and a put spread on the same underlying asset.

Let\’s break down the Iron Condor strategy using your example:

1. AAPL is currently trading at $187.48.
2. You sell a $200 call and buy a $205 call. This is your call spread.
3. You sell a $170 put and buy a $165 put. This is your put spread.

Now, let\’s calculate the maximum gain, maximum loss, and breakeven points for this trade.

Maximum Gain:

The maximum gain in an Iron Condor strategy is the net premium received when entering the trade. This is achieved when the price of the underlying asset is between the strike prices of the short call and short put at expiration.

• Let\’s assume you receive a premium of $2.00 for selling the $200 call and pay a premium of $1.00 for buying the $205 call.
• Similarly, you receive a premium of $1.50 for selling the $170 put and pay a premium of $0.50 for buying the $165 put.

The total premium received is $2.00 (from selling the call) + $1.50 (from selling the put) = $3.50 The total premium paid is $1.00 (for buying the call) + $0.50 (for buying the put) = $1.50

So, your maximum gain (net premium received) is $3.50 – $1.50 = $2.00 per share or $200 per contract (since one contract represents 100 shares).

Maximum Loss:

The maximum loss in an Iron Condor strategy is the difference between the strike prices of the long and short call (or put) minus the net premium received. This is achieved when the price of the underlying asset is either above the strike price of the long call or below the strike price of the long put at expiration.

In this case, the difference between the strike prices of the call options is $205 – $200 = $5.00 The maximum loss is therefore $5.00 – $2.00 (net premium received) = $3.00 per share or $300 per contract.

Breakeven Points:

The breakeven points in an Iron Condor strategy are the strike prices of the short call and short put adjusted by the net premium received.

The breakeven point on the upside (call side) is the strike price of the short call plus the net premium received. So, $200 + $2.00 = $202.00 The breakeven point on the downside (put side) is the strike price of the short put minus the net premium received. So, $170 – $2.00 = $168.00

So, if AAPL trades between $168.00 and $202.00 at expiration, you will not incur a loss on this trade.

LEARN FOR FREE OUR TWO MOST POPULAR STOCK OPTION STRATEGIES

[row]

[col span=\”6\” span__sm=\”12\”]

[ux_image id=\”5964\” height=\”56.25%\” link=\”https://unisonfinanceclub.com/landingpage/pluginops-page-5647-3/\” target=\”_blank\”]

[button text=\”CLICK TO LEARN\” color=\”alert\” radius=\”99\” expand=\”true\” icon=\”icon-checkmark\” link=\”https://unisonfinanceclub.com/landingpage/pluginops-page-5647-3/\” target=\”_blank\”]

[/col]
[col span=\”6\” span__sm=\”12\”]

[ux_image id=\”5970\” height=\”56.25%\” link=\”https://unisonfinanceclub.com/landingpage/pluginops-page-5647-3-2/\” target=\”_blank\”]

[button text=\”CLCIK TO LEARN\” color=\”alert\” radius=\”99\” expand=\”true\” icon=\”icon-checkmark\” link=\”https://unisonfinanceclub.com/landingpage/pluginops-page-5647-3-2/\” target=\”_blank\”]

[/col]

[/row]

Iron Butterfly Spread Trade Example

The Butterfly Spread strategy is a neutral options strategy that is designed to profit from stocks that are expected to have low volatility. It involves buying and selling options at three different strike prices.

Let\’s break down the Butterfly Spread strategy using your example:

1. AAPL is currently trading at $187.48.
2. You sell two $185 call options, and then you buy one $165 put option and one $205 call option.

Now, let\’s calculate the maximum gain, maximum loss, and breakeven points for this trade.

Maximum Gain:

The maximum gain in a Butterfly Spread strategy is achieved when the price of the underlying asset is equal to the strike price of the short calls at expiration. The maximum gain is the net premium received.

Let\’s assume you receive a premium of $2.00 for each of the $185 calls (total $4.00), pay a premium of $1.50 for the $165 put, and pay a premium of $1.50 for the $205 call.

The total premium received is $4.00 (from selling the calls). The total premium paid is $1.50 (for buying the put) + $1.50 (for buying the call) = $3.00.

So, your maximum gain (net premium received) is $4.00 – $3.00 = $1.00 per share or $100 per contract (since one contract represents 100 shares).

Maximum Loss:

The maximum loss in a Butterfly Spread strategy is the net premium paid when entering the trade. This is achieved when the price of the underlying asset is either above the strike price of the long call or below the strike price of the long put at expiration.

In this case, the maximum loss is the net premium paid, which is $3.00 per share or $300 per contract.

Breakeven Points:

The breakeven points in a Butterfly Spread strategy are the strike prices of the long call and long put adjusted by the net premium paid.

The breakeven point on the upside (call side) is the strike price of the long call minus the net premium received. So, $205 – $1.00 = $204.00. The breakeven point on the downside (put side) is the strike price of the long put plus the net premium received. So, $165 + $1.00 = $166.00.

So, if AAPL trades between $166.00 and $204.00 at expiration, you will not incur a loss on this trade.

YOU MAY ALSO BE INTERESTED IN READING AND LEARNING ABOUT OUR 5 CONCEPTS OF ANALYZING A BUSINESS TO TRADE STOCK AND STOCK OPTIONS

[row]

[col span__sm=\”12\” divider=\”0\” align=\”center\”]

[ux_image id=\”6026\” image_size=\”2048×2048\” width=\”70\” height=\”56.25%\” link=\”https://unisonfinanceclub.com/landingpage/pluginops-page-5647-3-2-2/\” target=\”_blank\”]

[row_inner]

[col_inner span=\”4\” span__sm=\”12\” align=\”center\”]

[button text=\”CLICK HERE TO LEARN\” color=\”alert\” expand=\”true\” icon=\”icon-checkmark\” link=\”https://unisonfinanceclub.com/landingpage/pluginops-page-5647-3-2-2/\” target=\”_blank\”]

[/col_inner]

[/row_inner]

[/col]

[/row]

Long Straddle Trade Example

The Long Straddle strategy is a neutral options strategy that is designed to profit from significant movements in the price of the underlying asset, regardless of the direction. It involves buying a call and a put option at the same strike price and expiration date.

Let\’s break down the Straddle strategy using your example:

1. AAPL is currently trading at $187.48.
2. You buy a $187.5 call option and a $187.5 put option.

Now, let\’s calculate the maximum gain, maximum loss, and breakeven points for this trade.

Maximum Gain:

The maximum gain in a Straddle strategy is theoretically unlimited on the upside as the price of the underlying asset can rise indefinitely. On the downside, the maximum gain is limited to the strike price of the put option minus the net premium paid, as the price of the underlying asset cannot fall below zero.

Maximum Loss:

The maximum loss in a Straddle strategy is the net premium paid when entering the trade. This is achieved when the price of the underlying asset is equal to the strike price of the options at expiration.

• Let\’s assume you pay a premium of $2.00 for the $187.5 call and a premium of $2.00 for the $187.5 put.
• The total premium paid is $2.00 (for buying the call) + $2.00 (for buying the put) = $4.00 per share or $400 per contract (since one contract represents 100 shares).

Breakeven Points:

The breakeven points in a Straddle strategy are the strike prices of the options adjusted by the net premium paid.

The breakeven point on the upside (call side) is the strike price of the option plus the net premium paid. So, $187.5 + $4.00 = $191.50.
The breakeven point on the downside (put side) is the strike price of the option minus the net premium paid. So, $187.5 – $4.00 = $183.50.

So, if AAPL trades above $191.50 or below $183.50 at expiration, you will not incur a loss on this trade.

Short Strangle Trade Example

The Strangle strategy is a neutral options strategy that is designed to profit from significant movements in the price of the underlying asset, regardless of the direction. It involves selling a call and a put option at different strike prices.

Let\’s break down the Strangle strategy using your example:

1. AAPL is currently trading at $187.48.
2. You sell a $195 call option and a $180 put option.

Now, let\’s calculate the maximum gain, maximum loss, and breakeven points for this trade.

Maximum Gain:

The maximum gain in a Strangle strategy is the net premium received when entering the trade. This is achieved when the price of the underlying asset is between the strike prices of the options at expiration.

Let\’s assume you receive a premium of $2.00 for the $195 call and a premium of $2.00 for the $180 put. The total premium received is $2.00 (for selling the call) + $2.00 (for selling the put) = $4.00 per share or $400 per contract (since one contract represents 100 shares).

Maximum Loss:

The maximum loss in a Strangle strategy is theoretically unlimited on the upside as the price of the underlying asset can rise indefinitely. On the downside, the maximum loss is limited to the strike price of the put option plus the net premium received, as the price of the underlying asset cannot fall below zero.

Breakeven Points:

The breakeven points in a Strangle strategy are the strike prices of the options adjusted by the net premium received.

The breakeven point on the upside (call side) is the strike price of the option plus the net premium received. So, $195 + $4.00 = $199.00.
The breakeven point on the downside (put side) is the strike price of the option minus the net premium received. So, $180 – $4.00 = $176.00.

So, if AAPL trades below $199.00 or above $176.00 at expiration, you will not incur a loss on this trade.

Covered Call Trade Example

The Covered Call strategy is a neutral to slightly bearish options strategy that is designed to generate income through the selling of call options against shares of the underlying asset that you already own. It involves selling a call option while simultaneously owning the equivalent amount of the underlying asset.

Let\’s break down the Covered Call strategy using your example:

1. AAPL is currently trading at $187.48.
2. You own 100 shares of AAPL and sell a $190 call option.

Now, let\’s calculate the maximum gain, maximum loss, and breakeven points for this trade.

Maximum Gain:

The maximum gain in a Covered Call strategy is the premium received from selling the call option plus the difference between the strike price of the call option and the purchase price of the underlying asset. This is achieved when the price of the underlying asset is equal to or greater than the strike price of the call option at expiration.

Let\’s assume you receive a premium of $2.00 for the $190 call. The total premium received is $2.00 per share or $200 per contract (since one contract represents 100 shares).

If AAPL is at or above $190 at expiration, you would also gain the difference between the strike price and your purchase price, which is $190 – $187.48 = $2.52 per share or $252 per contract.

So, your maximum gain is $200 (premium received) + $252 (appreciation of the underlying asset) = $452.

Maximum Loss:

The maximum loss in a Covered Call strategy is the purchase price of the underlying asset minus the premium received. This is achieved when the price of the underlying asset falls to zero.

In this case, the maximum loss is $187.48 (purchase price) – $2.00 (premium received) = $185.48 per share or $18,548 per contract.

Breakeven Point:

The breakeven point in a Covered Call strategy is the purchase price of the underlying asset minus the premium received.

So, the breakeven point is $187.48 (purchase price) – $2.00 (premium received) = $185.48.

So, if AAPL trades above $185.48 at expiration, you will not incur a loss on this trade.

PUT YOUR KNOWLEDGE INTO PRACTISE: JOIN OUT TRADING COMMUNITY

Here at Unison we show our Real Trading Statement Results and we dont hide anything from our clients … Real Statements from Interactive Brokers . Our Trading return goals are very Realistic & Achievable and Honest, that is why we are consistently profitable year after year.

If you are after honest traders that is really profitable and dont sell BS and unicorn type of returns for clients and would like to trade like a professional investor with the long term goal in mind, you are absolutely in the right place.

Here at Unison Trading we are not concerned how many trades we put a day but rather how many quality trades we have traded on that day, so please don’t expect to join us and hoping for daily adventure and excitement, we take our trading and business very serious as we find it the greatest opportunity for us to create/maintain wealth and this opportunity is not done by excitement but rather professionalism on everything we do.

Although, here at Unison Trading we don’t trade looking for excitement neither for having fun, we are very aware of the Law of Large Numbers (Number of Occurrence’s), as we always make sure that our number of occurrences are in place so the probabilities can play out. Remember that the maths doesn’t lie.

Why Follow our Trade Alerts

• 100% Real Broker Statement (Interactive Brokers)
• Consistently Monthly Income
• Realistic – Achievable and Honest Results
• Lower the cost basis of your portfolio (stock)
• 100% Transparency
• Generate Increased return on investment
• Control Stock without owing it
• Leverage Capital
• Reduce Risk

And of course the main thing as a professional trader, Be Profitable .

What You’ll Get

• Real-Time Trade Entry
• Real-Time Trade Exit
• Real-Time Trade Management

All streamed live straight to your WhatsApp, so you can just check the alerts and place the same trades with nothing hidden.

[ux_html label=\”Ad_1\”]

[/ux_html]