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Importance of Option Strategies

Option Strategies

Option strategies are dependent on a trader or investment professional's investment goals. In general, the primary factor of any option strategy is to determine whether stock values will increase or decrease.

When an individual invests in an option contract, he/she is doing so based on the prediction that stock prices will fluctuate in one direction. The option strategies that an individual employs will be dependent upon these predictions.

One of the common option strategies is known as a "bull spread." This strategy is employed when the investor expects stock values to increase. This option strategy involves buying and selling call options. If an investor predicts that stock values will fall, then he/she may utilize the bull spread's inverse, the "bear spread" strategy. The bear spread is an option strategy that involves the buying and selling of put option contracts.

NEXT: All You Need to Know About Stocks

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