There are over 400 option trading strategies that a trader can deploy. However, all these strategies have in common that they aim to distribute the risk and maximize the gains of an options trader.
If you are a beginner looking to get started with safe pre-built strategies, you have reached the right place. But before we talk about them, let us understand what readymade option strategies are.
What are Readymade Option Strategies?
Readymade option strategies are those that a web trading platform or trading app offers in-built on their options trading dashboard. If you want to trade options using a particular strategy, you do not have to manually create it. You can select the strategy name and number of legs and let the platform do the rest.
Dhan provides a selection of pre-built option strategies to make your trading much easier. While readymade strategies focus more on advanced trades, there are some safe strategies you can try at first.
4 Safest Pre-Built Strategies for Option Trading
The best thing a beginner can do is keep their trading simple. Here are the 4 safest pre-built strategies for option trading you can try today.
1. Covered Call
This strategy involves holding a long position in an underlying asset, such as a stock, and selling a call option on that asset. The call option is “covered” by the underlying shares, which limits potential losses. This is a relatively safe strategy because the potential downside is limited to the price of the underlying shares.
2. Protective Put
This risk management strategy involves purchasing a put option on an underlying asset you already own. The put option acts as a form of insurance. It protects against potential losses if the price of the underlying asset falls.
3. Bull Call Spread
This strategy involves buying a call option at a lower strike price and selling a call option at a higher strike price. This strategy limits potential losses and profits, making it a relatively safe choice. Ensure that both calls have the same expiration date and underlying asset. You can gain from the limited rise in the underlying asset price.
4. Collar Spread
This strategy involves purchasing a protective put option and selling a covered call option on an underlying asset you already own. This strategy helps limit potential losses while generating some income through the sale of the call option. It protects against huge losses but also limits your gains.
Traders must note that the complete safety of their trade also depends on the performance and price movement of the option and not solely on the executed strategy. You can access these strategies and more with the modern option trading platform offered by Dhan.
Reputed option trading platform – Options Trader by Dhan has come with pre-built strategies for option trading. While you can set up any of the advanced strategies in a few clicks, it is a good idea to first practice with some of the safest and most straightforward trading strategies.