If you’re looking to get started in CFD trading or want to brush up on your existing strategies, this article is for you. We’ve compiled a list of essential trading strategies that every CFD trader should know.
The long call
The long call is a classic strategy that involves buying a contract and then holding onto it until the price goes up, at which point you can sell it back for a profit. This strategy is best used when you expect the underlying asset’s price to rise. If you believe a stock will rise in price, you may purchase a CFD contract and then sell it back when the value has increased.
The short call
The short call is the opposite of the long call – instead of buying a contract and holding onto it, you sell a contract and then repurchase it at a lower price. It is best used when you expect the underlying asset’s price to fall. You can also use spread bets to speculate on the price movements of two different assets (or currencies). If you believe a stock will decrease in value, you could sell a CFD contract and then repurchase it when the price has dropped.
The long put
The long put is the same as the long call, with two exceptions: puts instead of calls and a lower strike price. The long put is identical to the long call except for one: puts rather than calls are used. Like calls, puts can give you the right to sell an asset at a specific price at some point in the If you think the price of an asset will go down, you can buy a put and then sell it once the price drops.
The short put
A short put is a financial instrument that combines the features of a short call and a long put. Put options let you sell an asset at a specific price, allowing you to profit from an expected rise in the value of that asset.
The long straddle
The long straddle is a strategy that involves buying both a call and a put on the same underlying asset. It is best used when you expect the asset’s price to move, but you’re unsure which direction it will go. If you believe a stock will be volatile but aren’t sure which way it’ll move, consider purchasing a call and put.
The short straddle
The short straddle is the opposite of the long straddle – instead of buying both a call and a put, you sell both a call and a put. It is best used when you expect the asset’s price to stay relatively stable. For example, if you believe a stock will not fluctuate much in either direction, you may sell both a call and put into making more profit.
The long strangle
The long strangle is similar to the long straddle but with a higher strike price for the call and a lower strike price for the put. It is best used when you expect the asset’s price to move, but you’re unsure which direction it will go. If you think a stock will be volatile but not sure whether it will go up or down, you could buy a call and a put with different strike prices.
The short strangle
The short strangle is a variant of the short straddle in which the strike price for the put option is higher than that of the call option. It’s ideal when the asset’s price is expected to remain stable. If you believe a stock will move little in either direction, you may sell both a call and put with different strike prices.
The long condor
The long condor is a strategy that involves buying two calls and two puts, with all four contracts having different strike prices. It is best used when you expect the underlying asset’s price to trade within a specific range. If you think a stock will go up and down but stay within a specific range, you could buy two calls and two puts with different strike prices.