Atm investing strategies refer to options trading strategies that can generate profits when the underlying asset price moves within a tight range or stays neutral. These strategies allow investors to profit when markets lack a clear direction. There are various neutral options strategies like covered calls, collars, straddles that can be used. These strategies have the advantage of profiting from different market conditions but have limited profit potential.
Covered call writing for income in neutral markets
A covered call strategy involves holding a long position in an asset and selling call options on that asset. This can generate income from option premiums during range-bound or sideways markets. However, the profit potential is capped on the upside.
Collar strategies to hedge risk in neutral markets
A collar strategy involves holding the asset, selling a call, and buying a put. This limits upside profit but also protects against downside risk. It allows investors participate in neutral markets while managing risk through options positions.
Atm investing strategies like covered calls and collars allow investors to generate income and manage risk during range-bound market conditions when the underlying price stays neutral. By using options, profits can be achieved from sideways price action.