Trading with options can give you exciting opportunities to profit from the stock markets under any condition. Whether the markets go up, down or trade in a range bound way, you can use one or more options to create a strategy for making a decent profit from the markets. If you are risk averse, then trading with options can also enable you to keep your losses limited to the amount of premium that you pay.

Today we will discuss certain exciting option strategies that can help you to profit from rising market. So, if you expect the markets to go up in the future you can use one of these to profit from the movement.

1. Buy Call/Long Call
This strategy is the simplest to understand amongst all the strategies that we will discuss today. It simply requires you to buy a Call today and sell it at a profit when the markets go up in the future.

How to execute: Buy an ATM Call.
When the markets go up then the premium of this Call will also rise. At this point you can sell the Call and book your profits.

Maximum profit: You can make unlimited profits as the markets go up.

Maximum loss: The worst thing that can happen is that the markets may not go up, which will make the Call expire worthlessly. Hence the maximum loss that you can incur is limited to the premium that you have paid.

2. Sell Put
This is a more aggressive strategy than the Long Call strategy. Here you will sell a Put and receive the premium. You will expect that the options will expire worthless when the markets go up, thereby allowing you to keep the premium as a profit.

How to execute: Sell a Put.

Maximum profit: Since this is an option sell strategy, your maximum profit will be limited to the premium that you have received.

Maximum loss: If the market starts to fall, then you will incur unlimited losses.

3. Bull Call Spread
Bull Call Spread is a strategy that involves buying two Calls at different strike prices to profit from the upward market movements. This strategy can give you limited profit when the markets go up and limited losses when the markets go down. Hence this is another excellent strategy which can help you to profit from a bullish market while keeping your losses limited.

How to execute:
] Buy an ITM Call with strike price which is below the current market price of the underlying.
] Simultaneously short an OTM Call with a strike price more than the current market price of the underlying.

Maximum profit: When the market starts to rise then the Call with the lowest strike price will start to give you profits. However, any profit beyond the higher strike price will be offset by losses from the short Call position. Thus,
Maximum profit = (Strike price of Short Call – Strike price of Long Call – net premium paid)

Maximum losses: When the market starts to fall, the long Call position will give you losses. However, any losses beyond the lowest strike price will be offset by profits from the short Call position, thus limiting your losses. Thus,
Maximum loss = Net premium paid

4. Bull Put Spread
This strategy is very similar to the Bull Call Spread, but we use Puts instead of Calls to execute this strategy.

How to execute:
] Buy an OTM Put with strike price which is below the current market price of the underlying.
] Short an ITM Put with a strike price more than the current market price of the underlying.
Please note that the premium of the OTM Put will be certainly lower than the premium of the ATM Put. Hence, you will receive more premium than what you will pay.

Maximum profit: If on the date of expiration of the options the price of the underlying stays above the highest strike price that you had chosen, then both the options will expire worthless and you will get to keep the net premium that you had received while executing the strategy. Thus,
Maximum profit = Net premium received

Maximum loss: If on the other hand the underlying falls below the lower strike price on that day, then you will enter the maximum loss which will be:
Maximum loss = (strike price of Short Put – strike price of Long Put) – Net premium received

5. Covered Call:
This strategy is a little different from the ones that we have already discussed. Instead of being pure option strategy, this one allows you to make profits against a portfolio of stocks that you already hold.

How to execute: To enter into this strategy, sell OTM Call options against the shares that you already hold and receive the premium.

Maximum profit: Since you have gone short on Calls, the OTM Call option will start to give u unlimited losses when the market goes up beyond the strike price at which you had shorted the Call. However, this loss will be offset by an increase in the value of shares that you hold.
So you can make a limited profit from this strategy which is as follows:
Max profit = Premium received – Purchase price of underlying + Strike price of Short Call

Maximum loss: This strategy can give you unlimited losses if the market starts to fall. In that case, the price of the underlying shares will crash and any fall beyond the amount of premium that you have received will be exposing you to unlimited losses. Hence,
Maximum Loss = purchase price of underlying – the current market price of underlying – max profit (as mentioned above)

Executing these option strategies correctly can give you good profits when you have a bullish view on the markets. If you want to know more, then please get in touch with us to learn these strategies in depth. At Finideas, we conduct exciting classes for beginners intermediate as well as expert traders where we show how these strategies work in the live markets.