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Level 3 of 5
Intermediate Traders
Who it’s for:Traders who are comfortable with basic strategies and want to expand into more advanced, high-reward setups.
Goal: Teach volatility-based trades like straddles, strangles, iron condors, and ratio spreads.
Intermediate Options Strategis
Synopsis: By completing Level 3, traders will have an intermediate understanding of volatility-based trades, multi-leg option strategies, and how to profit in different market conditions. Next, Level 4: Advanced Option Strategies will introduce butterfly spreads, dynamic hedging, and more risk-defined strategies.Free Lessons at https://majorwager.app
Lesson 1: Trading Volatility with Straddles & Strangles
What is a Straddle?
A straddle is an options strategy where a trader buys a call and a put at the same strike price and expiration, betting on a big move in either direction.
Example of a Long Straddle:
- Options strategies help traders manage risk, improve reward potential, and enhance consistency.
- Instead of purely buying calls or puts, traders combine different option positions for specific market outlooks.
Types of Option Strategies
- Single-Leg Strategies (Basic buying/selling calls and puts)
- Multi-Leg Strategies (Spreads, straddles, iron condors, etc.)
- Income Strategies (Covered calls, cash-secured puts)
Lesson 2: Iron Condors – Profiting from Low Volatility
What is an Iron Condor?
An iron condor is a combination of two credit spreads (bull put spread + bear call spread) designed to profit from a stock staying within a range.
Example of an Iron Condor:
- Stock: SPY at $450
- Sell SPY $460 Call for $2
- Buy SPY $470 Call for $1
- Sell SPY $440 Put for $2
- Buy SPY $430 Put for $1
- Total Credit Received: $2 per share
Possible Outcomes:
- If SPY stays between $440 and $460, all options expire worthless, and the trader keeps the $2 credit.
- If SPY moves outside the range, the trader starts incurring losses but is protected by the long options.
Why Use Iron Condors?
- Profits from low volatility (when stocks trade sideways).
- Defined risk, defined reward.
Lesson 3: Ratio Spreads – Taking Advantage of Skewed Risk/Reward
What is a Ratio Spread?
A ratio spread is an advanced spread where a trader buys one option and sells multiple options at a different strike price, typically with a net credit.
Example of a Call Ratio Spread:
- Stock: MSFT at $300
- Buy 1 MSFT $305 Call for $4
- Sell 2 MSFT $310 Calls for $2 each
- Net Credit: $0 ($4 – $4)
Possible Outcomes:
- If MSFT stays below $305, the options expire worthless, and the trader keeps the credit.
- If MSFT moves up slightly, profit increases.
- If MSFT explodes past $310, risk increases as the trader is short an extra call.
Why Use Ratio Spreads?
- Creates low-risk trades with high-reward potential.
- Works well in neutral to slightly trending markets.
Lesson 4: Calendar Spreads – Betting on Time Decay
What is a Calendar Spread?
A calendar spread involves selling a short-term option while buying a longer-term option at the same strike price, benefiting from time decay.
Example of a Calendar Spread:
- Stock: NVDA at $450
- Sell NVDA $450 Call expiring in 2 weeks for $5
- Buy NVDA $450 Call expiring in 1 month for $8
- Net Cost (Debit): $3 per share
Why Use Calendar Spreads?
- Profits from slower movement in the underlying stock.
- Takes advantage of faster time decay in near-term options.
- Works best in neutral markets.
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Continue to Level 4: Advanced Option Strategies where we will introduce butterfly spreads, dynamic hedging, and more risk-defined strategies.
