In This Chapter
Boosting current returns
Trading sideways markets
Understanding spread impact
The headlines always capture those periods when the markets move up or down. But the fact is that major averages, sectors, and individual securities all display varying degrees of trending (up or down) and trendless (sideways) conditions. As a straight stock or ETF trader, these trendless market periods are difficult to handle, especially if you use the markets as part of your overall income.
Option strategies are unique because they allow you to realize profits when markets move sideways. By using options, you can reap additional rewards on existing positions or trade the markets with limited risk. Long butterflies and condors are two such strategies introduced here. And although these strategies are complex, they are ideal for sideways markets because they can produce income or moderate gains as you manage the position, while limiting risk. Thus, there are two question to be answered as a trader during sideways markets: Am I willing to take limited chances, in most cases, to make limited rewards, which may be better than ...