1. Covered Call
What It Is: You own the stock and sell a call option above the current price to generate income.
When to Use: In a neutral to moderately bullish environment.
NetGEX Tip: Look for call-heavy GEX zones where market makers may be short gamma, this can cap rallies and make it easier to collect premium without being assigned.
In this example the market is very long gamma at the Call Resistance level. That means, all else being equal, Market Makers will have to be short once the price get at that level to be hedged
Smile Insight: Flat-to-inverted skews often favor call selling as premiums are richer.
2. Cash-Secured Put
What It Is: You sell a put option on a stock you’d like to own at a lower price, and you keep the premium if it doesn’t fall.
When to Use: Bullish-to-neutral environments.
NetGEX Tip: Target put-heavy zones where dealer gamma positioning may support price on dips, signaling lower probability of large downside moves.
Smile Insight: Steep downside skew = expensive puts = great risk-reward for put sellers. Look at how high the smile is on the left hand side in this environment. This could be an environment where put selling may work if volatility comes down.
3. Long Call
What It Is: You buy a call option to gain leveraged upside exposure.
When to Use: In a strong bullish trend, especially after a volatility compression.
NetGEX Tip: Avoid entering near high NetGEX zones where dealer hedging can suppress rallies. Instead, enter after dealer gamma flips from negative to positive.
If we take the previous NetGex again, we can see that at the Call Resistance level, it is likely that Market Makers will be short, dampening higher price action. A long Call strategy may not work in that case.
Smile Insight: Buy calls when skew is flat and implied volatility is low—cheaper premiums.
4. Long Put
What It Is: You buy a put option to hedge or speculate on downside moves.
When to Use: In bearish markets or ahead of a volatility shock.
NetGEX Tip: Avoid initiating just above strong put GEX support zones—dealers may aggressively hedge and cause rebounds.
Smile Insight: Puts become expensive when the left tail steepens. Only buy puts if you expect an outsized move soon.
Another way to decide whether to go long a put is by using our Swing Model which can help you detect price action in the next five days. That could give you hints together with all other MenthorQ models where price may be heading to.
5. Protective Put
What It Is: You hold a stock and buy a put to protect against a downside move.
When to Use: During uncertain periods (earnings, macro data, geopolitical risk).
NetGEX Tip: Use NetGEX to confirm whether dealers are long gamma (supportive) or short gamma (fragile) to help you assess if a hedge is truly needed.
Smile Insight: When implied volatility is high, hedging costs rise, so size protection accordingly.
Another way could be to look at the future GEX profile to use our Q-Scores. In this case you can look at the Momentum Q-Score and see whether momentum is moving to the downside. If it does, it may be a good time to start adding protection.
6. Vertical Spread (Debit)
What It Is: You buy and sell options of the same type and expiration but different strikes to lower your cost.
When to Use: When you have directional conviction but want to reduce risk.
NetGEX Tip: Use spreads to reduce exposure in high GEX zones, where pinning effects may cap directional movement.
Smile Insight: Favor debit spreads when the skew is shallow, you’re not overpaying for the long leg.
You can also chat to QUIN our AI Trading Assistant to get help
7. Credit Spread
What It Is: You sell one option and buy another further out-of-the-money to create a net credit with limited risk.
When to Use: In range-bound or slightly directional conditions.
NetGEX Tip: Use call credit spreads near gamma ceilings and put credit spreads near gamma floors. For example you can use the Call Resistance or close to the Call Resistance as the level where you sell your options.
Smile Insight: Sell credit spreads when the skew is steep, premium is rich and time decay favors the seller.
8. Iron Condor
What It Is: A combination of a bull put spread and bear call spread, collecting premium in a range.
When to Use: In low volatility or sideways markets.
NetGEX Tip: Great strategy when NetGEX shows clustering of gamma near the current price, pinning effects reduce directional breakouts.
Smile Insight: Smile steepness helps you widen wings while still getting paid—optimize for high skew environments.
9. Calendar Spread
What It Is: You sell a short-term option and buy a longer-term one at the same strike.
When to Use: When you expect minimal movement in the short term, but big moves longer term.
NetGEX Tip: Avoid putting calendar spreads near GEX flip zones—sudden gamma regime shifts can cause abrupt changes in implied vol dynamics.
Smile Insight: Look at how term structure impacts short- vs. long-dated vol at the strike—don’t just assume the long leg will benefit more.
You can also use the Term Structure to price your calendar spread to understand whether you are in a contango or backwardated environment.
10. Ratio Spread
What It Is: A strategy where you buy one option and sell more of another (e.g., buy 1 put, sell 2 puts).
When to Use: When you want to benefit from directional bias with some room to manage.
NetGEX Tip: Only attempt ratio trades when GEX data shows low risk of major dealer hedging whipsaws, especially near expiry.
Smile Insight: Steep skews can make ratio spreads attractive, overpriced wings give you extra premium cushion.
Using the Volatility Smile to Your Advantage
The volatility smile reflects how implied volatility changes across strikes. In equity indices, the smile often slopes downward (put skew), meaning OTM puts are more expensive than calls. In individual stocks, the smile can vary widely depending on supply-demand dynamics.
Here’s how to use the smile when building strategies:
- Steep Downside Skew: Consider selling puts or using put spreads. High demand for protection inflates premiums.
- Flat Smile: Great environment for long options. You’re not paying up for convexity.
- Inverted Smile: Usually short-term dislocations. Be careful with short gamma trades.
MenthorQ’s platform allows you to visualize the smile in real time across multiple tenors—this helps you decide which strikes are cheap or expensive on a relative basis.
Why Net GEX Matters
MenthorQ’s NetGEX model tracks where customers are concentrated in options positioning and infers how dealers are likely to hedge. By understanding if market makers are short or long gamma, you can anticipate:
- Pinning effects around expirations
- Where hedging flows will amplify or suppress moves
- When to fade rallies or buy dips
Combining this insight with your strategy—like timing a call sale at a gamma wall or buying a call when gamma flips—gives your trades context and edge.
Final Thoughts
Successful options trading isn’t about guessing direction, it’s about putting probabilities in your favor. By mastering these 10 core strategies, reading the volatility smile, and using tools like NetGEX to track hedging flows, you elevate your trading from guesswork to informed execution.
Remember: strategies are only as good as the context in which you apply them. With real-time dealer positioning and volatility diagnostics at your fingertips, you can position smarter, manage risk better, and stay one step ahead of the market.
Let the smile, and the data, guide you.