Options Trading Strategies Builder

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Derivative instruments like Options are complex in nature, and the strategies built around them are even more complex. Options strategies can be created with single-leg, multi-leg contracts. These contracts allow you to trade in all market conditions. So maintain your focus on building your option strategies.

Try Option trading strategy builder by SpeedBot, You will be able to create a deeply customized strategy just the way you want within minutes. This strategy builder is also very user friendly. So even if you are fairly new to options & trading, you will still be able to use it with ease.

14 Option Trading Strategies :

1) Orientation


Currently there are hundreds of options trading strategies in the market. Few are openly kept, some are kept to a limited group of people. No traders need to learn and master all the strategies.

In fact, study a few strategies and apply your trading brain over it to see what works for you best. So below we have discussed generic options trading strategies for different market conditions. They are based on Bullish, bearish & sideways/range bound markets. Let’s get going :

2) Bull Call Spread


This strategy is widely used and is preferable if you are predicting decent or moderate Bullish movement on the underlying index/stock. The upside and downside of the trades are kept Capped in this strategy. It reduces the risk & helps prevent capital erosion.

This is a 2-Leg strategy & trading is done with 2 or more options. You buy ATM Call options in 1st Leg and Sell OTM Call options in 2nd Leg. But, always make sure all the options in both legs are from a series of the same expiry.

3) Bull Put Spread


This is also the same spread approach strategy as Bull call spread. Here we are predicting decently bullish movements on the underlying index/stock. This is a 2-Legged strategy. One leg involves Buying OTM or Far OTM put options and 2nd leg involves selling ATM or Near OTM put options. It is more preferable than Bull call spread. Mainly because it is a ‘net credit’ transaction. Choose your strikes wisely here. Wider and higher the spread, more are chances for better profit margins.

Also, wider the spread, higher is the amount of risk associated with it. Consider using this when the market has some good amount of volatility.

4) Call Ratio Back Spread


You can make money with this strategy when the market moves a good amount upside or downside. Good profit if market goes down & Huge profit if market goes upwards. You only make a loss if the market does not move outside of a certain range.

That’s why big movements are important for this strategy. Unlike previous 2 strategies, this strategy has a 3-Legged approach. First 2 Legs involves buying OTM call options and 3rd leg involves selling ITM call options. This 2:1 ratio must be maintained.

5) Bear Call Ladder


Contrary to the name, this strategy depends on Bullish market movement. This strategy produced profits when there is very large bullish market movement. Not routine upwards movement. This strategy requires the market to make a really Big upwards movement.  

This options trading strategy has a 3-Legged approach. It is operated in a 1:1:1 ratio. Here you buy 1 ATM call & 1 OTM call and Sell 1 ITM call option. This pattern has to be followed to operate in this strategy. This can be multiplied however. You can operate in 3:3:3 ratio, 5:5:5 ratio and so on.

6) Synthetic Long


Synthetic Long: It is basically the strategy to achieve the same benefits that we get from Long futures. The payoffs are pretty similar to long futures, Synthetic longs are pretty simple to execute as well - traders have to Buy 1 ATM call option and Sell 1 ATM put option at the same time.


7) Bear Put Spread


This strategy also follows a 2-Legged approach, Like earlier spread strategies. You can pick any option in both legs. No need to compulsorily pick ITM,OTM options. But use this strategy when you are expecting decently bearish or downwards movement of the market.   

Biggest benefit of Bear put spread strategy is that it is Low risk. Traders with an extra cautious approach use this a lot. It results in Lower profit margins but at the same time is much more secure against making Losses. Always remember to pick all options in the same expiry range & they should belong to the same underlying asset.

8) Bear Call Spread


Bear call spread strategy is more preferable when premium rates for Call options have increased significantly due to market movements. It is a ‘net credit’ transaction. Which is good so that the money Flows into your account.

This is very similar to our previous strategy. Only difference is you bought Put options previously, here you will buy Call options to create a spread. You should definitely go with this strategy if you are predicting the volatility in the market to Increase. That will increase your profit chances for good.

9) Put Ratio Back Spread


Now, this is a 3-Legged strategy. 2 legs involve buying OTM put options, and 3rd Leg involves selling one ITM put option. You have to maintain this 2:1 ratio throughout. This strategy is also a Net Credit transaction. So the money will Flow into your account.

The biggest thing to note here is that this Strategy must be deployed when you are expecting Bigger market movements - downside or upside. Not suitable for small market movements. You make money in both cases of the market going down and going up, but it’s important that the market moves Big amount.

10) The Long Straddle


Now this is a really interesting strategy. Here your profit and loss are not affected at all by the direction of market movement. You make money in both cases : Market goes up, you make money. Market goes down, you make money. What’s important here then ?

It’s market volatility. Here you concurrently Buy an ATM call option and Buy an ATM put option. Preferably buy when market volatility is Lower. Then if the market moves a big amount before the option expiry period, you make profits. The volatility must increase after you set-up your Straddle.

11) The Short Straddle


This is just the opposite of the Long straddle strategy. Here you make profit if the market stays within a certain range. Higher movement between the Lower and upper Limit of range, higher will be your profit. If the market goes out of that certain range, Losses would be significant.

So, a really preferable approach when you predict the market to NOT make big movements. Here you sell the ATM call option & ATM put option. As you are selling options here, you will get Cash flowing into your account. A net credit strategy at the end.

12) The Long & Short Strangle


Strangles are a Cost-reduced version of straddles. The capital investment upfront is reduced with strangle. You have to pay a somewhat lesser option premium compared to straddles. However, to make profits with strangles you would need somewhat larger market movements to happen & in a relatively short amount of time.

Long Strangle: Trader buys 1 OTM Call option and 1 OTM put option concurrently. You have to maintain a 1:1 ratio. Multiplication is fine i.e. 2:2, 5:5. But the 1:1 balance must be maintained.

Short Strangle: This is the exact opposite of a long strangle. Here you would be selling OTM call & OTM put options. For obvious reasons, since this is a ‘short’ strangle. To make money with Strangles, the market volatility must increase while you are in the trade & Before the option expires.

13) Max Pain & PCR Ratio


Max Pain : So max pain is basically the market value point where option expiry happens. 85% of options expire worthless. So option buyers end up making Loss & Sellers make money. Max pain is the point at which if Options expires, The Loss of option buyers would be lowest as well as Loss in Money made by option sellers is also Lowest.

PCR Ratio : PCR ratio is Total option interest rate of puts divided by total open interest rate of calls . Now this ratio helps traders decide the Bear/Bull behavior of the market. If the ratio suggests Bull, then the market is expected to show ‘Bearish’ behavior, and vice versa.

14) Iron Condor


To make it easier to understand, Imagine Iron condor as a safer version of Short strangle. Short strangle has two open ends & If market movement goes outside of either of two ends, you end up making Loss. More the market goes away from end points, the more losses you make.

Iron condor is a protective mechanism version of Short strangle. Here you deal with Long OTM calls and Long OTM puts. These OTM calls will cover the both side ends of your short strangle. Hence reducing your loss potentials significantly. Some reduction in profit is possible, but the protection you get is supremely beneficial.

Benefits of using SpeedBot for Options Trading Strategy Builder


First of all, SpeedBot is an extremely user-friendly tool. This tool can be used very easily even if you have zero experience with option trading or even if you are a pro trader. So you can focus more on your trading & not have to worry about how to use the tool.

Additionally SpeedBot lets you create extremely customized trading strategies just the way you want. You don’t have to select from only the available options. You can build your strategy from scratch as well as deeply customize it. This ensures your entire strategy works 100% the way you want. Giving you your best shot at achieving higher trading returns.

Last but not least: SpeedBot is brilliantly tech-powered on the back-end with artificial intelligence and machine learning technologies. So it will guide you with strategy building based on not just historical data, but with past market movements, behavioral patterns formed before and so many other things. Enabling you to come out with Rock solid option trading strategies.

FAQs Related to Option Strategy Builder

Options Strategy Builder is a backtesting and execution tool specifically for options strategies in Nifty & Bank Nifty Options. Strategy creators can backtest options strategies since 2019.

Strategy creators can create easy to complex Options Trading Strategies using SpeedBot's Options Strategy Bot Builder. To know more about options trading strategies you can explore the options trading strategies page.

 

SpeedBot's Options Bot Builder can backtest a wide range of time-based options strategies in momentum to sideways market conditions. Current week, Next week, Current month and Next month expiries can be selected to backtest assorted options trading strategies.

How do you create an option strategy?

Creation of Options Strategies can be done in the Options Bot Builder which can backtested as well as traded in Live and Paper Trading Mode.

Strategy creators can create easy to complex Options Trading Strategies using SpeedBot's Options Strategy Bot Builder. To know more about the options trading strategies you can explore options trading strategies page.