There are literally tens of different spreads (and hundreds of overall strategies that use such spreads) that can effectively be applied to different market conditions. There isn’t a best strategy. However, there may be a best strategy for particular objectives, market conditions, and trading criteria.
The Important Things to Consider
1) do you understand the criteria that should be met before applying a particular strategy to ensure maximum profitability and market fit;
2) are you adept to manage the position you enter.
Be careful not to fall into the trap of believing that there is a magic formula for investing in options or that a “follow-the-leader mentality” will result in similar results from investor to investor. And if you find someone selling the strategy to end all other strategies, please run the other direction and warn others on the way to the exit!
Options Trading Warning
Let’s Take an Example
A person who finds success selling calls against their established portfolio holdings (“covered call writing”) may not be doing so simply to collect the premiums as a profit in a neutral or slightly bullish market but rather may be primarily using the strategy as a hedge against a fall in prices, where the premium collected from the sale of the call contract serves as an insurance policy of sorts to offset losses. This is an entirely different objective from someone that looking to sell calls for income.
Frequent options trading allows you the opportunity to sharpen your skills and determine which options strategies have a higher probability for success. The strategies you employ should conform to the investment goals and objectives you have established for yourself. Seeking to emulate someone else’s success may bring you some short-term gains, but over the long term you will find that small, consistent trades that allow you to bank gains as they are realized may be a better approach than chasing someone else’s success with increasingly large capital outlays.