Options trading means buying contracts that give you the right, but not the obligation, to buy or sell an asset at a certain price before the contract expires.
People often use options to hedge risk, but honestly, options trading itself demands some planning and a decent grasp of the basics.
This guide covers essential strategies for beginners. I’ll break down how each strategy works, when you might use it, and what risks and rewards you could face.
I’ve rounded up my top 10 options trading strategies here. I’ll walk you through some basics and give a quick rundown of each approach.
We’ll touch on conservative moves like covered calls and get into more complex stuff like iron condors.
You’ll see how options can help you earn extra income, shield your investments, or try to profit no matter which way the market moves, all while keeping your risk in check.
Low-Risk Options Strategies for Beginners
If you’re just starting out, it’s smart to begin with strategies that have clear risks and are easy to execute.
1. Covered Call
How a covered call works: You own shares of a stock and sell call options on those same shares. This brings in income from the premium you get for selling the call.
When to use it: If you have a neutral or slightly bullish view on a stock you own and want to make a bit more income, this is a good fit.
Risk profile: The biggest loss you could face is the drop in your stock’s value, though the premium helps cushion that. Your profit tops out at the strike price plus the premium.
Example: Say you own 100 shares at $50 each. You sell a call with a $55 strike, collecting $2 per share ($200 total).
If the stock stays under $55, you keep the premium. If it climbs above $55, you’ll sell at $55, but you still pocket $7 per share ($5 gain plus $2 premium).
2. Married Put
How the married put works: You buy shares of a stock and also buy put options for the same number of shares. It’s like buying insurance, you set a floor on how much you could lose.
When to use it: If you’re optimistic about a stock but want a safety net in case things go south.
Risk profile: The most you can lose is the difference between what you paid for the stock and the put’s strike price, plus whatever you paid for the put. If the stock goes up, your gains aren’t capped.
Example: You buy 100 shares at $100 and a $95 put for $5 per share ($500 total). Now, your max loss is $10 per share ($100 – $95 + $5), but if the stock surges, you enjoy all the upside.
3. Cash Secured Put
How the cash secured put works: You sell a put option and keep enough cash aside to buy the stock if you’re assigned.
When to use it: If you want to buy a stock but only if the price drops to a level you’re happy with.
Risk profile: Your worst-case scenario is owning the stock at the strike price minus the premium you got. If the stock tanks to zero, that’s your loss. The most you can make is the premium.
Example: Stock’s at $50, but you’d rather buy at $45. You sell a $45 put and collect $2 per share. If the stock stays above $45, you keep the $2. If it drops below $45, you buy at $45, but your real cost is $43 ($45 – $2).
4. Protective Collar
How the protective collar works: You own a stock, buy a put below the current price, and sell a call above it, all with the same expiration.
When to use it: If you want to protect your stock from big drops but also want to offset the cost by selling a call.
Risk profile: You limit your loss to the difference between the stock price and the put’s strike, plus any net cost. Your gain is capped at the call’s strike minus the stock price and net option cost.
Example: Own 100 shares of IBM at $100? Sell a March 105 call and buy a March 95 put. You’re shielded below $95 and might have to sell at $105 if IBM jumps.
Intermediate Options Strategies
Once you’re feeling more comfortable, these strategies offer more ways to balance risk and reward.
5. Bull Call Spread
How the bull call spread works: You buy a call at one strike and sell another call at a higher strike, both expiring at the same time.
When to use it: Use this if you’re moderately bullish and don’t want to pay full price for a call.
Risk profile: Your loss can’t exceed the net premium you paid. Max profit is the gap between strike prices minus what you spent.
Example: Stock’s at $50. Buy a $50 call for $3, sell a $55 call for $1. That’s $2 out of pocket ($200 total). You can’t lose more than $200, and your top profit is $300 ($5 difference – $2 premium).
6. Bear Put Spread
How the bear put spread works: You buy a put at one strike and sell another put at a lower strike, both with the same expiration date.
When to use it: If you expect a moderate drop in price and don’t want to pay full price for a put.
Risk profile: You risk only the net premium. Max profit is the difference in strikes minus your cost.
Example: Stock’s at $50. Buy a $50 put for $3, sell a $45 put for $1. Net cost is $2 per share ($200 total). Max loss is $200, max profit is $300 ($5 difference – $2 premium).
Volatility-Based Options Strategies
These strategies let you try to benefit from big price swings, no matter which way things go.
7. Long Straddle
How the long straddle works: You buy a call and a put at the same strike and expiration.
When to use it: If you think a stock’s about to make a big move but have no clue which direction.
Risk profile: The most you can lose is what you spent on both options. If the stock takes off, or crashes, your profit could be substantial.
Example: Stock at $50. Buy a $50 call for $3 and a $50 put for $3, spending $6 per share ($600 total). The stock needs to move more than $6 either way for you to come out ahead.
8. Long Strangle
How the long strangle works: You buy an out-of-the-money call and an out-of-the-money put, both with the same expiration.
When to use it: If you expect a big move but want to keep costs down compared to a straddle.
Risk profile: Max loss is the total premium you paid. If the stock moves far enough in either direction, you could see a decent profit.
Example: Stock’s at $50. Buy a $55 call for $1.50 and a $45 put for $1.50, so you’re out $3 per share ($300 total). It’s cheaper than a straddle, but you need the stock to move past $55 or below $45 to make it work.
Advanced Options Strategies
If you’re really getting into the weeds, these strategies can help you fine-tune your game for specific market setups.
9. Iron Condor
How the Iron Condor works: You sell an out-of-the-money put spread and an out-of-the-money call spread at the same time. Both spreads use the same expiration date.
When to use it: Try this when you think the asset will stay inside a certain price range until expiration.
Risk profile: Your maximum loss equals the width of one spread minus the net premium you collect. The most you can make is the premium you receive up front.
Example: Suppose a stock trades at $100. You could sell a $90 put and buy an $85 put, and at the same time sell a $110 call and buy a $115 call.
If you collect a $4 net premium, your maximum profit is $400 if the stock stays between $90 and $110.
The iron condor is definitely one of the more advanced credit spread strategies out there.
10. Butterfly Spread
How the butterfly spread works: You combine a bull spread and a bear spread, using three strike prices. For a long call butterfly, you buy one call at a low strike, sell two calls at a middle strike, and buy one call at a higher strike.
When to use it: Use this when you expect the price to hover near a specific level by expiration. It’s a pretty specific bet, honestly.
Risk profile: The most you can lose is the premium you pay. Your maximum profit comes if the asset lands right at the middle strike price when the options expire.
Example: If a stock trades at $50, you might buy one $45 call, sell two $50 calls, and buy one $55 call. The closer the stock finishes to $50, the more you stand to make.
Understanding Options Basics
Before you get lost in the weeds with strategies, make sure you know the basics of options trading. It’s like building a house, you need a solid foundation.
Call vs. Put Options
Call options give you the right to buy the underlying asset at the strike price before expiration. People usually buy calls if they’re betting on a price increase.
Put options let you sell the underlying asset at the strike price before expiration. Investors buy puts when they think prices will drop.
Key Terminology
- Strike price: The price where you can buy or sell the asset if you exercise the option.
- Premium: What you pay to get into an options contract.
- Expiration date: The day the option contract stops being valid.
- In-the-money (ITM): The option has real value. For calls, that’s when market price > strike price; for puts, market price < strike price.
- Out-of-the-money (OTM): The option doesn’t have intrinsic value. For calls, market price < strike price; for puts, market price > strike price.
- At-the-money (ATM): The market price and strike price are about the same.
Market Trends and Opportunities
The options world keeps changing, and that means new chances, and new headaches, for investors. It’s honestly a moving target.
Retail Participation Surge
Retail traders now make up 30% of all options activity. Back in 2019, it was only 10%.
Commission-free trading platforms and more education have really opened the doors for everyday folks.
Rise of Zero-Day-to-Expiry (0DTE) Options
0DTE options now account for 23.7% of total options volume in 2025. These short-term plays create new opportunities, but they also crank up the volatility.
Technology Integration
AI-driven tools now offer predictive models, automated trades, and better risk controls. This makes even complex strategies available to regular investors, not just the pros.
Risk Management Essentials
To stick around in options trading, you really need solid risk management. It’s not optional, it’s survival.
Position Sizing
Try to keep each options position to 1-5% of your total portfolio. That way, one bad trade won’t wipe you out.
Diversification
Mix up your options trades across different assets, strategies, and expiration dates. It helps smooth out the bumps.
Exit Strategies
Set your profit goals and stop-loss limits before you open a trade. Lots of traders take profits at 50% of the max or cut losses if they lose 100% of their initial bet.
Continuous Education
The options market never sits still. Keep learning, read books, take courses, or just practice, so you don’t get left behind.
Getting Started: A Step-by-Step Approach
- Learn the fundamentals: Get comfortable with options lingo, pricing basics, and the Greeks (Delta, Gamma, Theta, Vega). They really do matter.
- Practice with paper trading: Use a simulator to try out strategies without risking your hard-earned cash.
- Start with conservative strategies: Covered calls or cash-secured puts are great for building experience while keeping risks manageable.
- Keep detailed records: Track every trade, including your strategy, the market setup, and how it turned out. You’ll spot patterns and learn faster.
- Scale gradually: As you get more confident and see steady results, slowly increase your position sizes and try out more advanced strategies.
Unlock Your Investment Potential with Strategic Options Trading
If you’re starting out, knowing the basics of options strategies really matters. With the right approach, you can use these flexible tools to boost returns and control risk in a way that fits your comfort zone.
- Options contracts let you buy or sell assets at set prices, but you don’t have to use them if you don’t want to.
- Strategic options trading can help limit losses and maximize potential gains.
- Different strategies fit different markets, bullish, bearish, or just plain boring.
- Options trading hit record highs in 2025. In January alone, traders moved 1.2 billion contracts.
- Retail traders now make up 30% of all options activity. That’s a pretty big shift.
10 Options Trading Strategies Every Investor Should Know – My Conclusion
Options trading gives investors a lot of flexibility, but you do need to put in the time to really get how these things work. Start with the basics, then add more strategies as you go, that’s how you build something that actually fits your own goals and comfort level.
It’s not about swinging for the fences every time. The real trick is just sticking to your plan and keeping risk in check, trade after trade.
And let’s be honest, options have exploded in popularity lately. If you get the hang of these strategies, you’ll be ready to spot opportunities no matter what the market’s throwing at you, while keeping your risks under control.