When trading in stocks and shares there are really only three options available;

• To be long and benefit from rising prices
• To be short and benefit from falling prices
• To be flat and have no position

But with options so many more different potential outcomes can be traded, theoretically taking advantage of any conceivable market view. For example Vodafone may be trading at £1.30. An options trader might be forecasting that the share price is unlikely to move above £1.40 or below £1.20 over the next 2 months. Selling an option strangle or straddle short (these are discussed in detail - look at the links above) will be a profitable trade if the share price stays within this band. Options are therefore useful tools in both trending and sideways markets.

The opposite of this trade can also be implemented should the trader feels that a major move in Vodafone is coming but he or she is unsure of the direction. If Vodafone explodes or implodes then profits can be generated either way by buying a straddle or a strangle. We have listed some of the more common option strategies in the sub-menu at the top of this page.