Option Hedging

When? -  When we expect the moment will trending above or below predicted levels and expired outside of the buy option strike. Strategy? -  Buy a Call option and Put option of the predicted level strike. Short lower strike Put Option and short higher Strike Call Option. Advantages? -  Helps to reduce losses instead of unlimited Profit in 'Long Strangle'. Disadvantages? -  Loss when the market is stuck. Max Profit?  - Leg difference - Net premium Max Loss?  - Net premium Break-even point?  - Lower = Lower PE Strike + (PE Leg Diff. + Net Prem.); Upper = Higher CE Strike - (CE Leg Diff. + Net Prem.)

When? -  When we expect the market will trending but the direction is not confirmed. Slightly reverse after trending moment. Strategy? -  Buy a Call option and Put option of the same strike. Short lower strike Put Option and short higher Strike Call Option. Advantages? - Helps to reduce losses instead of unlimited Profit in 'Long Straddle'. Disadvantages? -  Loss when the market is stuck. Max Profit?  - Leg difference - Net premium Max Loss?  - Net premium Break-even point?  - Lower = Lower PE Strike + (PE Leg Diff. + Net Prem.); Upper = Higher CE Strike - (CE Leg Diff. + Net Prem.)

When? -  When we expect the moment will trending above or below predicted levels and expired outside of the buy option strike. Strategy? -  Buy a Call option and Put option of the predicted level strike Advantages? -  Very effective in the trending market. Less capital required. Limited losses and unlimited profit. Disadvantages? -  Loss when the market is stuck. Max Profit?  - Unlimited Max Loss?  - Call Premium + Put Premium Break-even point?  - Lower = Put Strike - Put premium - Call premium; Upper = Call Strike + Call premium + Put Premium

When? -  When we expect the market will trending but the direction is not confirmed. Strategy? -  Buy a Call option and Put option of the same strike Advantages? -  Very effective in the tending market. Less capital required. Limited losses and unlimited profit. Disadvantages? -  Loss when the market is stuck. Max Profit?  - Unlimited Max Loss?  - Call Premium + Put Premium Break-even point?  - Lower = Put Strike - Put premium - Call premium; Upper = Call Strike + Call premium + Put Premium

  When? -  When the moment of the market is expected between predicted levels (sideway market) and expired between the sell option strike. But possibility of the market will trending. Strategy? -  Sell a Call option and Put option of predicted level strike. Buy lower strike Put option and higher strike call option. Advantages? -  Very effective in the sideway market. Losses can be controlled Disadvantages? -  More margin required Max Profit?  - Net premium Max Loss?  - Leg difference - Net premium Break-even point?  - Lower = Put Sell Strike - Net premium; Upper = Call Sell Strike + Net Premium

  When? -  When the moment of the market is expected very low (sideway market) and expired on/near the sell option strike. But possibility of the market will trending. Strategy? -  Sell a Call option and Put option of the same strike. Buy lower strike Put option and higher strike call option. Advantages? -  Very effective in the sideway market. Losses can be controlled Disadvantages? -  More margin required Max Profit?  - Net premium Max Loss?  - Leg difference - Net premium Break-even point?  - Lower = Put Strike - Net premium; Upper = Call Strike + Net Premium

When? -  When the moment of the market is expected between predicted levels (sideway market) and expired between the sell option strike. Strategy? -  Sell a Call option and Put option of predicted level strike Advantages? -  Very effective in the sideway market Disadvantages? -  Huge margin required, unlimited losses when the market becomes trending. Max Profit?  - Net premium Max Loss?  - Unlimited Break-even point?  - Lower = Put Strike - Put premium - Call premium; Upper = Call Strike + Call premium + Put Premium

When? -  When the moment of the market is expected very low (sideway market) and expired on/near the sell option strike. Strategy? -  Sell a Call option and Put option of the same strike Advantages? -  Very effective in the sideway market Disadvantages? -  Huge margin required, unlimited losses when the market becomes trending. Max Profit?  - Net premium Max Loss?  - Unlimited Break-even point?  - Lower = Put Strike - Put premium - Call premium; Upper = Call Strike + Call premium + Put Premium

When? -  The market is expected to go slightly low, but the no chance of going in an upward direction. Strategy? -  Buy a Call option and sell a lower strike Call option Advantages? -  Losses can control in both directions Disadvantages? -  More margin required, Bar R/R. Max Profit?  - Net premium Max Loss?  - Strike difference - net premium Break-even point?  - Lower Strike + Net Premium

  When? -  The market is expected to go slightly low, but the chance of going in an upward direction. Strategy? -  Buy a put option and sell a lower strike put option Advantages? -  Losses can control in both directions. Good R/R Disadvantages? -  More margin required  Max Profit?  - Strike difference - net premium Max Loss?  - Net premium Break-even point?  - Upper Strike - Net Premium

When? -  The market is expected to go slightly low, but not go up. Strategy? -  Sell a call option of the strike below which you expect the market to go Advantages? -  Profitable even if we are slightly wrong (Market moves down and slightly up) Disadvantages? -  Unlimited loss  Max Profit?  - Premium Received Max Loss?  - Unlimited Break-even point?  - Strike + Premium received

When? -  The market is expected to go very low. Strategy? -  Buy a put option of the strike below which you expect the market to go Advantages? -  Limited loss and unlimited profit Disadvantages? -  Out-of-money options have less potential to make a profit. Max Profit?  - Unlimited Max Loss?  - Premium Paid Break-even point?  - Strike - Premium paid

When? -  The market is expected to go slightly high, but the no chance of going in a downward direction. Strategy? -  Buy a Put option and sell a higher strike Put option Advantages? -  Losses can control in both directions Disadvantages? -  More margin required  Max Profit?  - Strike difference - net premium Max Loss?  - Net premium Break-even point?  - Lower Strike + Net Premium

When? -  The market is expected to go slightly high, but the chance of going in a downward direction. Strategy? -  Buy a call option and sell a higher strike call option Advantages? -  Losses can control in both directions Disadvantages? -  More margin required  Max Profit?  - Strike difference - net premium Max Loss?  - Net premium Break-even point?  - Lower Strike + Net Premium

  When? -  The market is expected to go slightly high, but not go down. Strategy? -  Sell a put option of the strike above which you expect the market to go Advantages? - Profitable even if we are slightly wrong (Market moves up and slightly down) Disadvantages? -  Unlimited loss  Max Profit?  - Premium Received Max Loss?  - Unlimited Break-even point?  - Strike - Premium received

When? -  The market is expected to go very high. Strategy? -  Buy a call option of the strike above which you expect the market to go Advantages? -  Limited loss and unlimited profit Disadvantages? -  Out-of-money options have less potential to make a profit. Max Profit? - Unlimited Max Loss? - Premium Paid Break-even point? - Strike + Premium paid