Two Factors In Option Trading Strategies

There are many strategies to choose from when it comes to  options. However, there are two main issues that generally guide  a trader in choosing a given strategy.

The first is trader opinion. That is whether the trader thinks the underlying stock of an option will be bullish, bearish, or rather stagnant. If he thinks the stock is bullish or bearish, then option trade strategies that address directional movements may be employed. If he thinks the stock will stay within some range, then option trading strategies that are designed for stagnant situations may be employed.

The second issue for picking a option strategy is considerations of volatility. The level of volatility allows the trader to decide whether the premiums for a option are cheap, expensive or in between. Then the trader can decide to employ a buying or selling option trading strategy.