Neutral Market Strategies – Overview | Trading Lesson | Traders' Academy

Duration 1:19

Level Intermediate

Overview of the Neutral Market Strategies module which introduces how to use options when there are relatively small price movements in the underlying asset, or where volatility is expected to diminish.

Study Notes:

In this module, we’ll explore a couple of strategies that may be used by option traders to take advantage of a lull in the markets. And by lull, I’m referring to a period of relatively small movements in the price of an underlying asset, or where volatility is expected to diminish.

Once again, we’ll walk you through examples of how each strategy works, and then show you a practical application of how such trades may be created using IBKR’s Trader Workstation. And while we’re talking specifically about strategies designed for neutral markets, don’t forget that the opposite side of each trade infers higher volatility, which would appeal to option traders looking for larger price movements or upward shifts in volatility.

Disclosure: Interactive Brokers

The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Interactive Brokers, its affiliates, or its employees.

Disclosure: Margin Trading

Trading on margin is only for sophisticated investors with high risk tolerance. You may lose more than your initial investment. Before trading, read the Disclosure of Risks of Margin Trading, available in the Forms and Disclosures section of your local Interactive Brokers website. For additional information regarding margin loan rates, see the Pricing section of your local Interactive Brokers website.

Disclosure: Options Trading

Options involve risk and are not suitable for all investors. For information on the uses and risks of options read the "Characteristics and Risks of Standardized Options" also known as the options disclosure document (ODD). Multiple leg strategies, including spreads, will incur multiple transaction costs.