Core Viewpoint - The article emphasizes the importance of mastering four basic options trading strategies: Long Call, Covered Call, Long Put, and Short Put, which are essential for most trading scenarios [1][2][3]. Summary by Strategy Long Call - Application Scenario: Used when the stock price is expected to rise significantly before the option's expiration, often around key events like earnings reports [1]. - Newbie Suggestions: - Focus on the breakeven point, especially for out-of-the-money calls, as small price increases may not cover the premium cost [2]. - Prefer options with strike prices close to the current stock price for better liquidity and manageable profit potential [2]. - Avoid options with very short expiration dates unless confident in short-term price movements [2]. Covered Call - Application Scenario: Suitable for holding a stock expected to trade sideways in the short term, allowing for extra income through selling call options [3]. - Newbie Suggestions: - Avoid naked call selling; ensure stock holdings exceed the number of options sold [3]. - Choose strike prices that are sufficiently above the current stock price to provide a safety margin [3]. - Keep expiration dates relatively short to reduce uncertainty [3]. Long Put - Application Scenario: Ideal for profiting from a significant decline in stock price or hedging against potential losses in held stocks [4]. - Newbie Suggestions: - Select near-the-money puts and avoid very short expiration dates unless confident in short-term price movements [4]. - Pay attention to the breakeven point; the stock must fall below this level to realize profits [4]. Short Put - Application Scenario: Used when expecting a stable stock price in the short term, allowing for income generation through selling puts, with the potential to buy the stock at a lower price if it declines [5]. - Newbie Suggestions: - Only sell puts if prepared to buy the underlying stock; avoid selling puts on unfamiliar or fundamentally weak companies [5]. - Opt for short-term options (around 30 days) with strike prices below the current stock price to minimize margin pressure [5]. Practical Application Examples Scenario A - Investor A expects a stock to rise to $290 before earnings and buys a Long Call with a strike price of $255, achieving a breakeven at $268.35 [7][8]. Scenario B - Investor B anticipates a stock drop to $235 and buys a Long Put with a strike price of $250, achieving a breakeven at $245.35 [9][10]. Scenario C - Investor C holds 1,000 shares and buys a Protective Put with a strike price of $220 to hedge against potential declines, ensuring the portfolio value remains above 87% [11][12]. Scenario D - Investor D, expecting sideways movement, sells a Covered Call with a strike price of $270, earning $360 in premiums [13][14]. Scenario E - Investor E sells a Short Put with a strike price of $225, earning $74 in premiums, aiming to buy the stock at a lower price if it declines [15][16]. Conclusion - The article concludes that there is no "best" strategy, only the most suitable one based on individual market expectations, emphasizing the need for investors to select options that align with their predictions to maximize potential returns [17][18].