# Options how to choose a strategy, What is Your Outlook?

We can trade index options, options on bonds, options on futures, and general stock options on companies.

In this article, we are going to dive into a simplistic, yet effective, way to options how to choose a strategy a particular option strategy with a live position. There are only two main items to evaluate before you choose the type of options strategy you want to implement in your portfolio — and that is 1 the projected direction of the underlying and 2 the velocity at which that underlying will move.

### How to Select the Right Strike Price Trading Options?

Direction of the Underlying The underlying can move in three directions: 1 up, 2 down, or 3 sideways stagnant. Velocity of the Underlying The velocity of the underlying is how fast the underlying will move in any direction. It can move quickly or slowly to its destination.

Step 1: Determine the Direction of the Underlying Many of us use technical analysis while others use a fundamental analysis approach to evaluate an underlying.

- Your outlook on an underlying security is basically what you expect to happen to its price, such as whether you predict the price will rise or whether you predict it to fall.
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The best way is to use a combination of both. We recommend using technical analysis first.

### Pick the Right Options to Trade in Six Steps

Chart the underlying and visually make out the direction of where it is going. Once you establish a direction, confirm it with fundamental analysis. Through technical analysis, you establish that the underlying is rising in value.

If you find substantial information that supports your technical analysis, then you have confirmed the direction of the underlying. Step 2: Determine the Velocity of the Potential Underlying Move Understanding the velocity is combination of two things: 1 implied volatility and 2 market events.

- The Bottom Line The strike price of an option is the price at which a put or call option can be exercised.
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- Options Basics: How to Pick the Right Strike Price

Implied volatility is the up-and-down movement of the market. Generally, volatility is created due to uncertainty from real market events.

When you identify a stock that is in a range here are your go-to strategies. Short Strangle Short Straddle Iron Condor Once we have our opinion on the stock direction, we have a much more manageable list of strategies to choose from. The next thing we need to do is take a look at where implied volatility is trading so we can narrow our list even further.

Market events come in many forms. They could be scheduled economic reports to irregular significant events to unexpected disasters natural or man-made. Here are a few examples of market events.

It really is that simple. The problem that most people encounter is analysis paralysis. Luckily for you, in our options course we teach you the best possible way to eliminate the excessive information that leads to this paralysis. Happy trading!

- Understanding how options work in your portfolio will help you choose an options strategy.
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- SJ OptionsHow to Choose the Right Option Strategy | SJ Options