Here are some strategies used to make money in options markets. All are used when you are uncertain of market direction. If you have a strong view on market direction, simple call and put options provide the best strategies for making money.
You trade two at the market options and put a reverse position on one in the money and one out of the money option. This can be constructed to be long or short of call or put option butterflies. The structure of a long butterfly will make tou money when volatility is low; a short butterfly works when volatility is high. Losses and gains are limited. Gains are limited to the premiums you receive and losses to the strike prices of the two outside options less premiums received.
Trade one call option and one put option at the same strike price. Trade both in the same direction (buy or sell). A short straddle should be used when you expect low volatility and are unsure of market direction. Your maximum gain is the net premium you receive from the options, your loss is unlimited if the market moves sharply in either direction. If you expect high volatility the long straddle is used. Your maximum loss will then be limited to the premium you pay and your maximum profit is unlimited. The more the market moves the more profit you make.
Go long one in the money option and short two out of the money options of the same kind (call or put). This strategy works when market volatility is low. When the market improves your loss is limited, but is unlimited on market falls. Your maximum profit is the premium you are paid for the two options you short, les the premium paid for the option you are long of. Use this when you expect low volatility and are uncertain of market direction.
Trade one out of the money put option and one call option at a higher price. Both options are traded in the same direction (either long or short). This structure means you make money once the market has moved a certain amount in either direction. The maximum loss is the total premium you pay for the options and the maximum profit is unlimited. Use this when you think there will be large market movements, but are unsure of direction.
You buy one in the money call option and buy one put option at a higher strike price. Your maximum loss is limited to the premium you paid for the options. Your maximum profit is unlimited. This strategy works when volatility is high, the further the market moves, in either direction, the more money you make. This strategy should be used when you expect large market movements but are unsure of the direction. The structure is similar to a strangle, but with in the money options instead of out of the money.