Strategies to Options Trading FAQs

What does Naked options or uncovered trading means ?

Uncovered options trading allows you to sell an Option and not hold any position in the underlying. This is also known as naked options trading. A trader can sell an Option without the shares of the underlying.

A naked or uncovered Option strategy is risky because it has a limited profit potential and a high loss potential. An uncovered Put Option will yield the highest profit if the strike price expires at less than the price of the underlying. When the underlying price drops to zero, it is considered a loss. Higher strike prices mean higher losses. Maximum profit for an Uncovered Call is achieved when the underlying price drops to zero. Maximum loss depends on the strike price.

Is there any best strategy for options trading ?

What does Paired Option Contracts mean ?

What does Bull Call Spread strategy means and when it should be used ?

What does Bear Call Spread means and when it should be used ?

What does an option spread means ?

What does collar option strategy means and when we should use it ?

When option spreads can be use ?

How many types of options spread ?

What does Relative Strength Index means ?