If you’re looking to get into options trading in the United Kingdom, knowing which gammas and thetas are the best for your needs is essential. In this article, we’ll look at some of the most popular options trading strategies and give you our picks for the best gammas and thetas to use with them.
Popular options trading strategies and the best gammas and thetas for these strategies
There are many different options trading strategies that you can use, and each has its distinct advantages and disadvantages. So, before we get into which gammas and thetas are best for each strategy, let’s take a quick look at some of the most popular ones.
Covered call
The most common options trading strategy is known as the covered call. It involves buying shares of a stock and then selling call options against those shares. If the stock price increases, you’ll make money on both the stock and the option. But if it falls, you’ll only lose money on the stock.
For the covered call, you’ll want to choose a relatively low gamma, which will help limit your downside risk. Theta is also essential, and you’ll want to choose a positive theta, which will help offset the time decay of the options you are selling.
Iron condor
Another popular options trading strategy is known as the iron condor. It involves buying a put option and a call option with different strike prices. For example, you might buy a put option with a strike price of $50 and a call option with a strike price of $60. You’ll make money on the put option if the stock price falls below $50. And if it rises above $60, you’ll make money on the call option.
For the iron condor, you’ll want to choose a relatively high gamma, which will help maximize your profit potential. Theta is also essential, and you’ll want to choose a negative theta, which will help offset the time decay of the options you are buying.
Long call
The long call is a simple options trading strategy that involves buying a call option. It gives you the right to buy the underlying stock at the option’s strike price. If the stock price goes up, you’ll make money; if it falls, you’ll lose money.
For the long call, you’ll want to choose a relatively high gamma, which will help maximize your profit potential. Theta is also essential, and you’ll want to choose a positive theta, which will help offset the time decay of the option you are buying.
Long put
The long put is another simple options trading strategy that involves buying a put option, and it gives you the right to sell the underlying stock at the option’s strike price. If the stock price falls, you’ll make money; if it rises, you’ll lose money.
For the long put, you’ll want to choose a relatively low gamma, which will help limit your downside risk. Theta is also essential; you’ll want to choose a positive theta, which will help offset the time decay of the option you are buying.
Straddle
It is an options day trading strategy that involves buying a call option and a put option with the same strike price. It allows you to profit from both rising and falling markets. However, it’s important to note that you’ll only make money if the stock price moves significantly in either direction or if it doesn’t, you’ll lose money.
For the straddle, you’ll want to choose a relatively high gamma, which will help maximize your profit potential. Theta is also essential, and you’ll want to choose a negative theta, which will help offset the time decay of the options you buy.
How to start options trading?
Now that we’ve covered some of the most popular options trading strategies let’s look at how you can start options trading in the United Kingdom.
If you’re interested in options trading, the first thing you’ll need to do is open an account with a brokerage that offers options trading. Not all brokerages offer this, so it’s essential to do your research beforehand. When you’ve opened an account, you’ll need to fund it with enough money to cover the cost of the options you want to buy.
When your account is funded, you can begin placing orders for options. It’s important to remember that options are traded in pairs. So, when you buy an option, you’re also selling another option, known as a spread.
It’s also important to remember that options are subject to time decay, meaning their value will decline as they approach their expiration date. So, it’s essential to manage your positions carefully and close them out before they expire.
In conclusion
As you can see, there’s no one-size-fits-all answer to choosing the best gammas and thetas for your options trading strategies. It’s vital to consider your own goals and objectives when making these decisions. If you’re willing to take on more risk, then you may want to choose a higher gamma. But a lower gamma may be a better choice if you’re looking to minimize risk.
