Good morning, traders…

You’re missing huge trading opportunities.

Not because the stock isn’t on your watchlist, but because there are certain strategies you don’t even know exist. 

Beginner option traders learn two plays: 

• Buy calls if you think the underlying stock is going up.
• Buy puts if you think the underlying stock is going down. 

That’s the entire playbook for many. And if it works for you, there’s nothing wrong with it. 

Take it from me. I mostly stick to trading calls … because it works.

Just two days ago, I made 150% in four hours on a bog-standard calls trade.*

But what happens when you think a stock is going to rip higher, but you can’t afford the premium? 

What happens when you know a big move is coming, but you have no idea which direction? 

What happens when you own 500 shares of a stock and want to generate income while you hold?

And what happens when the market is too choppy to play puts or calls by themselves?

Exotic options strategies can deliver huge wins when stock traders can’t even participate. 

You can reduce your cost while maintaining upside. You can profit from volatility without picking a direction. You can generate income from stocks you already own.

From iron condors to jade lizards … they may sound like metal bands, but they’re actually the strange names traders have given certain option strategies.

Step 1: You have to know these strategies exist. 

Step 2: You have to understand when (and how) to use them.

These plays aren’t rocket science. They’re simple combinations of contracts you already know how to trade. 

Understanding their flexibility opens up an entire universe of setups you’re currently sleeping on.

Stop Ignoring The Possibilities. 

Exotic Strategy #1: Credit Spreads

A credit spread means you buy and sell contracts of the same type on the same stock, with the strike price you sell closer to the money than the one you buy.

The advantage: you receive money (credit) as soon as you open the position. You’re hoping the bid/ask spread between your two strikes narrows. If it does, you keep the credited premium (plus any additional profit).

Credit spreads offer lower risk/lower reward. 

This strategy won’t make you rich unless you have significant capital, but it has a high probability of success. 

Exotic Strategy #2: Debit Spreads

Debit spreads are the opposite. You still buy and sell contracts of the same type on the same stock, but this time, the strike you buy should be closer to the money than the strike you sell.

Where you’re paid to open a credit spread, it costs you money to open a debit spread. 

But you’re paying much less than you would for a straight-up call. 

Bull call spreads (and bear put spreads) are the most popular forms of debit spreads. These work best when you think a stock is going up with a clear price target in mind. Buy a strike in your target range and sell the strike nearest to your high-end price target.

Example: 

Buy XYZ $400 Calls @ $4.00

Sell XYZ $405 Calls @ $3.00

Your spread costs: $4.00 – $3.00 = $1.00.

Their low premiums make debit spreads an intriguing possibility for traders with small accounts.

Exotic Strategy #3: Straddles and Strangles

Ever felt a big move is coming in a stock, but you have no idea which direction? 

That’s where straddles come in.

You create a straddle by buying a put and a call at the same strike price (and the same expiration date). This strategy profits from a big move in either direction.

The catch: your straddle costs almost twice as much as individual calls or puts. You’re paying for a higher probability of success. 

And time decay is always working against you. 

Straddles can be especially useful during earnings season when weird specifics could ruin (or save) a report. Instead of making a 50/50 bet on direction, you play both sides.

There’s also a variant known as a strangle, where you buy a put and a call at different strikes on the same expiration date. 

Strangles work well if you have a specific range you think the stock could trade to beyond the current share price.

Warning: Avoid straddles and strangles on contracts with extremely high implied volatility heading into earnings. The post-earnings implied volatility (IV) “crush” often destroys both sides of the trade — leaving you with an even bigger loss. 

Exotic Strategy #4: Covered Contracts

If you own 100 shares or more in a long-term stock position, it can generate income beyond the basic equity returns.

Selling “covered” options contracts can be a low-risk, consistently profitable strategy for anyone who owns optionable stocks.

Compare this to selling a “naked” contract (without holding shares). On the wrong week, those losses could exceed your initial position (or even your entire account).

But if you own more than 100 shares of a stock long-term, you can sell covered calls. 

A contract is “covered” if you own at least 100 shares of the underlying stock. 

If the contract gets assigned, you won’t get margin called … but you will have to hand over your shares.

You don’t want that outcome either, but getting shares assigned is far better than getting margin called.

Covered calls allow you to sell options and earn passive income without risking your entire account.

How To Use These Strategies

Option strategies are determined by how you combine different contracts. 

If you mix the right cocktail of calls and puts, you can create setups that stock traders can’t even dream of.

That said, don’t jump into an exotic spread without doing your homework. 

If one of these strategies appeals to you, paper trade it before you risk real money.

You never know. One of these ideas might lead to your best trade of next week.

Happy trading,

Ben Sturgill

*Past performance does not indicate future results