Listed options are among the most popular instruments used by traders in the UK. These options offer several benefits, including the ability to trade on various underlying assets, the flexibility to choose from a range of expiry times, and the potential to generate significant profits. However, it is essential to select the right strategy to maximise success.

Covered Calls

A covered call entails holding a long position in an underlying asset and writing (selling) call options on the same asset. The key to this strategy is to select the right underlying asset – ideally, one that is not expected to make large movements in the short term. It will help to ensure that the option expires worthless, allowing the trader to keep the premium.

The trader buys an underlying asset and then sells call options against it to implement a covered call. The premium is used to offset some of the asset’s costs. If the underlying asset price remains relatively static, the option will expire worthlessly, and the trader will keep the premium.

Long Call

A long call is a bullish strategy involving buying an underlying asset’s call option. The trader believes that the asset’s price will increase and hopes to make a profit by selling the option at a higher price.

The trader buys a call option on an underlying asset to implement a long call. If the price of the asset increases, the trader will make a profit by selling the option at a higher price. If the price of the asset decreases, the trader will lose money.

Short Put

A short put is a bearish strategy that involves selling a put option on an underlying asset. The trader believes that the asset’s price will fall and hopes to make a profit by repurchasing the option at a lower price.

The trader sells a put option on an underlying asset to implement a short put. If the asset price falls, the trader will make a profit by repurchasing the option at a lower price. If the price of the asset increases, the trader will lose money.

Long Straddle

A long straddle is a strategy that involves buying both a call and a put option on an underlying asset. The trader believes that the asset’s price will move significantly but is unsure which direction it will move in.

The trader can buy a call and a put option on an underlying asset to implement a long straddle. If the price of the asset increases, the trader will make a profit on the call option. If the asset price falls, the trader will make a profit on the put option.

Iron Condor

An iron condor is a strategy that involves holding both a call and a put option on an underlying asset with varying strike prices. The trader believes that the asset price will remain within a specific range and hopes to make a profit by selling the options at a higher price.

The trader buys both a call and a put option on an underlying asset with different strike prices to implement an iron condor. If the asset price remains within the strike prices of the options, the trader will make a profit by selling the options at a higher price. If the asset price moves outside of this range, the trader will lose money.

Butterfly Spread

A butterfly spread is a strategy that involves holding both a call and a put option on an underlying asset with varying strike prices. The trader believes that the asset price will remain within a specific range and hopes to make a profit by selling the options at a higher price.

The trader buys both a call and a put option on an underlying asset with different strike prices to implement a butterfly spread. If the asset price remains within the strike prices of the options, the trader will make a profit by selling the options at a higher price. If the asset price moves outside of this range, the trader will lose money.

Click here to see the available listed options for trading in the UK at Saxo capital markets.