Bullish Trend Option Strategies
The most popular bullish view option strategies are:
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a. Naked Call Buy:
The buyer of a call option expects the asset price to go up in the short term or in a brief period. It is a single-long call option contract.
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Directional view: Bullish
Implied Volatility view: Increase
Max loss: Limited
Max Profit: Unlimited
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Greeks impact:
Increase in IV: Positive
Theta Decay: Negative
Delta: Positive
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Unfavorable Scenario:
a. The asset price falls or remains sideways
b. Decrease in Implied Volatility (IV)
Payoff Diagram:
b. Call Spread:
Call Spread is the combination of buying an ATM (at-the-money) call option contract & shorting an OTM (out-of-the-money) call option contract. It is a debit option strategy
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Directional view: Mild Bullish
Implied Volatility view: Increase
Max loss: Limited
Max Profit: Limited
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Greeks impact:
Increase in IV: Positive
Theta Decay: Negative
Delta: Positive
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Unfavorable Scenario:
a. The asset price falls or stays sideways
b. Decrease in Implied Volatility (IV)
Payoff Diagram:
c. Calendar Call:
A calendar call is a combination of shorting the current expiry ATM (at-the-money) call option contract & going long next expiry ATM call option contract.
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Directional view: Mild Bullish
Implied Volatility view: Increase
Max loss: Limited
Max Profit: Limited
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Greeks impact:
Increase in IV: Positive
Theta Decay: Positive
Delta: Positive
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Unfavorable Scenario:
a. The asset price stays outside the breakeven range
b. Decrease in Implied Volatility (IV)
Payoff Diagram:
d. Diagonal Put:
Diagonal Put is a bullish strategy. It is a combination of shorting the near-expiry ATM put and the long far-expiry OTM put.
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Directional view: Bullish
Implied Volatility view: Decrease
Max loss: Limited
Max Profit: Limited
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Greeks impact:
Increase in IV: Negative
Theta Decay: Positive
Delta: Positive
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Unfavorable Scenario:
a. The asset price falls below the short strike price
b. Increase in Implied Volatility (IV)
Payoff Diagram:
e. Call Ratio Backspread:
Call Ratio Backspread is a bullish strategy. It is a combination of shorting the near-expiry ATM call and buying twice the quantity of slight OTM calls.
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Directional view: Bullish
Implied Volatility view: Increase
Max loss: Limited
Max Profit: Limited
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Greeks impact:
Increase in IV: Positive
Theta Decay: Negative
Delta: Positive
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Unfavorable Scenario:
a. The asset price falls or remains below bought option strike price
b. Decrease in Implied Volatility (IV)
Payoff Diagram:
f. Modified Call Butterfly:
Modified call butterfly is a bullish strategy. It is a combination of going long ITM call option & shorting twice the quantity ATM calls option & long far OTM call option
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Directional view: Mild Bullish
Implied Volatility view: Decrease
Max loss: Limited
Max Profit: Limited
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Greeks impact:
Increase in IV: Negative
Theta Decay: Positive
Delta: Positive
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Unfavorable Scenario:
a. The asset price falls or remains below bought option strike price
b. Increase in Implied Volatility (IV)
Payoff Diagram:
g. Bull Put Spread:
Bull Put Spread is a bullish strategy. It is a combination of shorting the OTM put option & buying a far lower strike OTM put option as a hedge.
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Directional view: Neutral to Bullish
Implied Volatility view: Decrease
Max loss: Limited
Max Profit: Limited
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Greeks impact:
Increase in IV: Negative
Theta Decay: Positive
Delta: Positive
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Unfavorable Scenario:
a. The asset price falls or remains below bought option strike price
b. Increase in Implied Volatility (IV)
Payoff Diagram:
h. Strap:
Strap is similar to the long straddle options strategy. It only requires one adjustment of buying additional call options for bullish bias.
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Directional view: Bullish
Implied Volatility view: Increase
Max loss: Limited
Max Profit: Unlimited
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Greeks impact:
Increase in IV: Positive
Theta Decay: Negative
Delta: Positive
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Unfavorable Scenario:
a. The asset price remains in a range
b. Decrease in Implied Volatility (IV)
Payoff Diagram:
h. Long Combo:
Long Combo is a strong bullish bias strategy. It is a combination of a long OTM call option & short OTM put option.
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Directional view: Bullish
Implied Volatility view: Neutral
Max loss: Unlimited
Max Profit: Unlimited
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Greeks impact:
Increase in IV: Positive
Theta Decay: Negative
Delta: Positive
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Unfavorable Scenario:
The asset price falls or remains below the long call option strike price
Payoff Diagram:
