We all would like to know if the market price will go up or down but does it really matter?

Non Directional Trading

Non directional trading has shown to be useful in the financial markets due to the profits these trades can make in a flat market. Due to their ease use and less risk, these non directional trading strategies or neutral strategies are now becoming more and more popular. It does not matter whether the financial tools goes either up or down for profit to be made via non directional trading but rather the volatility of the prices which would determine your profit. This is what is known as neutral strategy. Here are some examples of non directional strategies. The condor strategy is an example to non directional trading strategies. This will involve selling out of the buy calls and the money calls at a much higher strike price and simultaneously buying puts at a low strike price while traders will sell out of money puts. Another example would be the straddle strategy. This strategy holds and takes both put and call positions at the same expiration.
Position will only become money making if the underlying financial instrument has a change in value, whether it be high or low and also will involve the short and long straddles. Some other examples include the strangle strategy and also risk reversals. To sum up, non directional means that the method of trading does not require the trader to have a permanent side in a trading market. The only direction the trader should follow is that which is winning and succeeding. The main element in mastering non directional trading schemes is to identify the direction the market is taking and where you should place the investments.

Directional Trading

Directional trading makes up the majority of traders in the financial market today. They are those who try to predict the direction the market is going to turn. They are also cause for much headache for others. To master or to be average in directional trading a massive amount of time needs to be spent on training and practicing, also there is the need to be behind the computer watching over each and every transfer. A directional trader needs to keep up to date with all news concerning the market, new news is so important to a directional trader. Of course from this little overview you can tell that it takes a lot of patience and dedication to fully succeed as a directional trader. This level of trading and constant access to the market will also affect your broker fees making them more expensive. As a directional trader you must also be on the go, meaning that at odd times you will have to be checking the market to see what is moving where and take necessary action. You must also be very quick when deciding what decision to make hence the reason why they must remember all strategies possible.

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Iron condor options are meant to find the best between reward and volatility. When in a fixed range you profit the most, however those that are most boring with low betas are more than likely to remain fixed and also will be the lowest in volatility and in turn produce the least reward. The spread is divided into 4 legs, 2 money puts and 2 money calls, all which will expire at the same time. The strike prices of calls are also the exact same as with the difference between the puts. As you may have understood you will be selling both a call and put spread.
When selling a call it means that you both buy and sell a call that has a lower strike price. Due to the low strike price the premium received from the sale will be much higher than the amount spent on buying the call. This basically will mean that you will start with a surplus of cash. By the underlying security remaining lower than both they will be worthless by the time they expire which will leave you with the original cash profit. If however it may go higher than the strike price you will be at a loss when the price falls between the 2 strike prices. Be this as it may, the loss that was taken will be the difference between them due to the market price going above the highest strike price, and this call will grow in value while the call sold will not.
When you are selling a put spread this will mean that you both buy and sell a put option as a much higher strike price. This will cause you to have a surplus of cash after the profit made from selling the put at a higher strike price that what was paid for the lower strike price put. By the underlying security remaining above the both of the strikes then they will be worthless after expiring and you will be left with the initial cash being your profit. If however it may go higher than the strike price you will be at a loss when the price falls between the 2 strike prices. Be this as it may, the loss that was taken will be the difference between them due to the market price going above the highest strike price, and this put will grow in value while the put sold will not.
Both the put and call are hedges which will prevent any large amount of loss your position in case the security goes down or up. Now it is important that you don’t get greedy as some have and you don’t spend that money. With this type of spread you are selling both a put and call spread which are out of money. This way maximum profit is made from the security which would not go up to that lower strike price of the calls nor would is fall to the high striker price of the put.

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