Tastylive: 3 Ways to Trade Options Without Picking Direction

Traders have many ways to play the market. Most traders who expect a big directional move gravitate towards options. That’s because options allow investors to control a larger amount of shares compared to buying stock.

Directionality can mean a big move higher or lower. A trader who thinks a stock will fall after earnings can buy a put option as a directional bet. Or a call option if they think shares will move higher.

However, the market often has sideways moves. Directionality doesn’t work all the time. Or the market loses its predictable patterns and channels of trading, like in the recent selloff.

That’s where neutral options trading strategies come into play. These strategies can make investors money whether stocks go up, down, or sideways. This is known as being “directionally neutral.”

An options strangle use put and call options equally far from an at-the-money trade. These strangles can see one leg profit from a big move in one direction. However, that comes at the cost of a loss in the other leg. Varieties include price-neutral strangles, equidistant strangles, or delta-neutral strangles.

This strategy won’t lead to big swing profits, but it can provide options traders with consistent profits. That can come in handy during times of market uncertainty, when big daily swings occur.

To see a full breakdown of neutrality options trades, click here.