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The Top 3 Low-Risk Options Strategies For Beginners

By:Eric Villa

Cure the ills of your portfolio with the help of covered calls, short puts and iron condors

tastylive recently completed a guide to understanding options risks. Here are some of the videos you can watch to understand the right strategies for your risk tolerance. 

Ranking RISK-FREE to MOST RISKY options strategies

Is your options portfolio sick? Don’t worry. We’ve got a doctor on call. Dr. Jim, Ph.D., broke down the nuances of options trading risk in his last crash course, ranking options strategies from risk-free to most risky. 

Dr. Jim also articulated some astonishing insights for undefined risk option trades. These are the trades many shy away from, but with Dr. Jim's expert analysis you'll understand the surprising truths that can turn these daunting prospects into opportunities for the savvy trader.

For those ready to elevate their trading game and conquer the markets with knowledge and poise, tune in to Dr. Jim's comprehensive crash course. It's time to transform your options trading from a game of chance into a strategic art form. Watch the full course and arm yourself with the insight you need to trade with confidence and precision.

How to trade a covered call

Attention traders! Are you ready to amplify your trading game with a strategy that's perfect for those just starting out? Let's dive into the world of covered calls, where you can enhance your positions in powerhouse stocks like Apple (AAPL), Microsoft (MSFT) and Tesla (TSLA) while trimming your cost basis.

Here's the deal: Covered calls are like a bullish cheerleader for your portfolio. They share the same risk vibe as short puts but with a confident bullish twist. By holding shares of your favorite companies—think AAPL, MSFT, TSLA—and selling call options against them, you're setting yourself up for a win-win scenario.

Imagine this: You're collecting premium cash upfront and boosting your probability of profit (POP) with every trade. Even if AAPL, MSFT or TSLA shares decide to take a little breather and not climb higher, you're still in the green. That's the beauty of covered calls—you make money from the get-go.

Covered calls are your financial armor, providing a cushion against downturns and effectively lowering your cost basis. That means you're not just reducing risk; you're setting the stage for increased profitability.

Account growth: Short puts vs. stock (backtests to see) | market measures

Are you weighing the risks and rewards of short puts vs. long stock positions? Let's dive into the strategic world of options and equities, focusing on the historical performance of short puts. 

In our study we examine the profit and loss patterns of short puts and pit them against the traditional long stock approach. We're on a mission to uncover which short put strategy, with deltas ranging from 30 to 70, mirrors the risk-reward profile of holding 100 shares of long stock.

The insights we've gathered reveal a fascinating dynamic: while long stock inherently carries greater exposure, opting to sell 30 delta puts can align your worst-case exposure closely with that of long stock but with the tantalizing bonus of a higher win rate.

However, traders, take heed! It's crucial to acknowledge the presence of tail risk in your strategic playbook and to maintain a disciplined approach by trading short options in moderation. Watch our full study to understand how you can use short puts as better long exposure than traditional stock. 

Iron condors: Options strategy management

Harness the power of the iron condor, a masterful options strategy designed for the stock that holds its ground. Picture this: You're setting up not one, but two strategic out-of-the-money short vertical spreads. Below the fray, you place a short put spread, and soaring above, a short call spread. This is the realm of the iron condor, where stability is your ally.

Imagine the ticker symbols of your favorite stable stocks, like Microsoft or Johnson & Johnson (JNJ), barely budging. That's where the iron condor thrives. Your best-case scenario? Both spreads remain untouched by the market's whims, gliding toward expiration worthless and leaving you the victor.

To understand the right time to integrate this strategy into your options toolkit, watch our full explanation above. 

Eric Villa is a YouTube specialist at tastylive. 

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

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