Usually, taking single or concurrent positions either long or short of different contracts at different strike price and with different expiration can be termed as option strategies. Value of calls increases when the value of underlying asset increases and the value of put increases when the value of underlying asset decreases. So if talking about a particular asset if the market value of this asset increases then it will cause the price of calls to increase and if the market value of asset decreases then it will cause the price of puts to increase. .Broadly speaking there are two option strategies namely “Bullish strategies” and “Bearish strategies”, let’s look at them one by one:

1.)    Bullish strategies: These types of strategies are applied when a trader believes that the underlying asset’s value is going to fly. The simplest strategy which any novice can apply is buying call option if he/she thinks that market is going to move upwards. Then there are set of traders who believes in little higher risk and are bullish can set a target price for an asset and accordingly create a bull spread which turns out to be quite low in investment. For set of traders who has lower risk appetite may choose to go for option strategies which would be profitable until the time the price of underlying asset do not go below the strike price within the contract period. Up to some extent this strategy would also have downside protection. An example of this strategy is writing “out of the money” covered calls.

2.)    Bearish strategies: These strategies are complete opposite of bullish strategies. Bearish strategies are applied when the trader is of the belief that market or the value of underlying asset is going to fall. The most important aspect to consider in this case is to predict how low the value stock can go and the time horizon so that best rewards can be extracted out of the trade. Buying put option is the simplest of all bearish strategies that any novice trader can apply. Risk takers would try to predict a target price for the stock and accordingly buy the spread which would be a low cost investment as well as it would make money if the market falls.

So traders can keep these strategies in mind and accordingly take positions which can fetches them best returns.

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