In front of the options contract interface, some people are watching the rise and fall of Tesla's stock price, some are trying to figure out the fluctuations of Bitcoin before the halving, and some are staring at the Greek letters on the screen to calculate the time loss - these three types of people represent the three major schools in the options world: direction school, volatility school and time school. Just like the swords and hidden weapons in martial arts novels, each has its own unique skills, and the three types of strategies rise and fall in different market environments.

1. Directional strategy: surfing in the K-line waves

Directional strategy is the Shaolin Kung Fu of the options world, which emphasizes hitting the key points. When you are sure that Tesla will break through $250, buying a call option with an exercise price of $260 is like aiming at the wall with a bazooka - for every $1 increase in the stock price, the benefits brought by Delta will push up profits like an accelerator engine.

But directional trading has a fatal trap: the loss of time value. Before Nvidia’s GTC conference, many retail investors bought a large number of weekly call options. Although the stock price rose by 5% as expected, Theta devoured 3% of the principal every day, and the final profit was eaten up by the time tax before it could even warm up.

The directional strategies of Bitcoin players are even crazier. Before the halving event, the open interest of the $80,000 call option on the Deribit exchange surged by 200%. These "faith warriors" are betting not only on the price direction, but also on the nuclear explosion of market sentiment.

But real veterans will play a "directional charge with insurance": buying a $70,000 call option while selling a $65,000 put option, using the premium collected to offset part of the cost. This "combination strategy" is like installing a silencer on a submachine gun, which not only retains the upside but also reduces the risk of exposure.

Volatility Strategies: Dancing in the Storm of Uncertainty

Volatility strategy is like the Wudang school of Tai Chi, which emphasizes using the opponent's strength to counter the opponent's strength. When the market is in panic, IV (implied volatility) will expand like a balloon. When Bitcoin was sideways last year, the IV of at-the-money options was only 45%, but it suddenly soared to 85% a week before the halving, which is equivalent to the weather station suddenly issuing a hurricane warning.

At this time, the volatility traders will buy a straddle: holding a $70,000 call and put option at the same time. As long as the price fluctuates by more than ±10%, it will make a profit regardless of whether it goes up or down, just like betting on the big and small plates at the same time in a casino - the dealer can win whatever he opens. Sometimes, even if the price does not fluctuate, the IV that rises out of thin air will make the straddle double buy combination profitable instantly.

The most subtle part of volatility trading is "surface arbitrage". Before Tesla's earnings report, the IV of near-month options was 20% higher than that of far-month options. Some institutions took the opportunity to sell weekly call options and buy monthly call options to earn the distorted spread of the volatility term structure. This is like finding that fresh milk in the supermarket is cheaper than milk with a long shelf life, and decisively stocking up and waiting for the price to return.

Bitcoin options players are better at "volatility skew sniping": when the IV of an $80,000 call option is 15% lower than that of a $60,000 put option, it means that the market is overly afraid of a fall. At this time, going long on bullish volatility and short on bearish volatility can often reap the benefits of repair when the fear subsides.

3. Time Value Strategy: Become a Tax Collector of Time

Time value strategy is a hidden weapon of Tang Sect, killing people without being seen. When you see that Bitcoin quarterly options steadily lose 0.5% of their value every day, you will understand why it is said that "time is the friend of option sellers".

The "Iron Eagle Strategy" commonly used by professional institutions is like setting up an automatic harvester: selling $72,000 call options and $68,000 put options, while buying more out-of-the-money $75,000 call options and $65,000 put options as insurance. As long as the price fluctuates between $68,000 and $72,000, the time value will fall into the bag like gold sand in an hourglass.

Time hunters in the U.S. stock market prefer to play "calendar magic". Nvidia's weekly call options lose 1.2% of their value every day, while monthly call options only lose 0.3%. Some traders will sell weekly options to reap quick money, while buying monthly options to guard against black swans. This is like running a chain of convenience stores - selling expiring food (weekly contracts) at a high frequency and hoarding storable goods (monthly contracts) at a low price. This strategy during the earnings season allows some institutions to still earn 0.15% of "time tax" every day when the stock price is sideways.

4. The practical art of three-dimensional linkage

Real masters never use a single strategy. For example, when Bitcoin fluctuates between $65,000 and $70,000, top traders will build a "three-body model":

1. Directional dimension : Sell $72,000 call options (betting on resistance level)

2. Volatility Dimension : Buy $68,000 straddle combination (to prevent breakthrough)

3. Time Dimension : Short Weekly Theta, Long Monthly Vega

This combination is like deploying infantry, artillery, and air force on the battlefield at the same time. During the Bitcoin halving event, a hedge fund used this strategy to eat up the Gamma benefits of directional fluctuations, the Vega benefits of volatility expansion, and the Theta benefits of time decay when the price went up and down. The triple superposition achieved a single-day net value growth of 5.8%.

5. Next Issue Preview

Tomorrow night we will delve into "Buyer Psychology Training"

Homework

1. Strategy check : Find the next month's Bitcoin options on the Deribit platform, build directional/volatility/time value combinations, and record the changes in the profit and loss structure within three days.

2. Volatility Diary : Record the IV data of Tesla's at-the-money options for three consecutive days and compare its deviation from the 30-day historical volatility

3. Time experiment : Use 1% of the position to sell Bitcoin call options this week, and record the profit and loss ratio of Theta loss and price fluctuations every day