OPTION TRADING STRATEGIES

Various trading combination of put and call option are called option trading strategies. The result of dynamical trading on standardized and over the counter option markets was the discovery of numerous option trading strategies that are used for speculation, hedging or arbitrage. All strategies are based on six basic positions which are either long or short in underlying or option. Various combinations of basic strategies can create new net positions of different risk and profit potential. Attainable strategies are numerous and various. Consequently, the investor who has the access to options of certain features therefore has the possibility of implementing the specific strategy which is by its complexity and by the amount of risk and profit involved the most adequate strategy for his trading as well as his expectations regarding price movement or expectations regarding price volatility. In addition, the final action is determined by the knowledge and trading skills of the investor. Options can provide a range of possibilities for investors on financial markets, but in order to seize them, one must know specific ways of using this instrument. The multi-criteria systematization of the most frequently used option strategies, presented in the paper, should contribute to their clearer understanding and overview.