fx Methods
THE FOREX CONSULTANTS
OPTION VOLATILITY STRATEGY
Below is a list of the volatile options trading strategies that are most commonly used by options traders. We have included some very basic information about each one here, but you can get more details by clicking on the relevant link. If you require some extra assistance in choosing which one to use and when, you may find our Selection Tool useful.
Long Straddle
We have briefly discussed the long straddle above. It's one of the simplest volatile strategies and perfectly suitable for beginners. Two transactions are involved and it creates a debit spread.
Long Strangle
This is a very similar strategy to the long straddle, but has a lower upfront cost. It's also suitable for beginners.
Strip Straddle
This is best used when your outlook is volatile but you think a fall in price is the most likely. It's simple, involves two transactions to create a debit spread, and is suitable for beginners.
Strip Strangle
This is basically a cheaper alternative to the strip straddle. It also involves two transactions and is well suited for beginners.
Strap Straddle
You would use this when your outlook is volatile but you believe that a rise in price is the most likely. It is another simple strategy that is suitable for beginners.
Strap Strangle
The strap strangle is essentially a lower cost alternative to the strap saddle. This simple strategy involves two transactions and is suitable for beginners.
Long Gut
This is a simple, but relatively expensive, strategy that is suitable for beginners. Two transactions are involved to create a debit spread.
Call Ratio Backspread
This more complicated strategy is suitable for when your outlook is volatile but you think a price rise is more likely than a price fall. Two transactions are used to create a credit spread and it is not recommended for beginners.
Put Ratio Backspread
This is a slightly complex strategy that you would use if your outlook is volatile but you favour a price fall over a price rise. A credit spread is created using two transactions and it is not suitable for beginners.
Short Calendar Call Spread
This is an advanced strategy that involves two transactions. It creates a credit spread and is not recommended for beginners.
Short Calendar Put Spread
This is an advanced strategy that is not suitable for beginners. It involves two transactions and creates a credit spread.
Short Butterfly Spread
This complex strategy involves three transactions and creates a credit spread. It isn't suitable for beginners.
Short Condor Spread
This advanced strategy involves four transactions. A credit spread is created and it isn't suitable for beginners.
Short Albatross Spread
This is a complex trading strategy that involves four transactions to create a credit spread. It isn't recommended for beginners.
Reverse Iron Butterfly Spread
There are four transactions involved in this, which create a debit spread. It's complex and not recommended for beginners.
Reverse Iron Condor Spread
This advanced strategy creates a debit spread and involves four transactions. It isn't suitable for beginners.
Reverse Iron Albatross Spread
This is a complex trading strategy that is not suitable for beginners. It creates a debit spread using four transactions.