Long Calls & Long Puts are the simplest and most direct way to capture returns from movement in the underlying stock when using options.  Due to the shorter duration of swing trades, which focus mainly on reversals, breakouts and continuations that last from a few hours at times to several days, ATM (at-the-money) options are usually well suited for this type of trade in highly volatile markets.  However, when markets are in a more normalized state it often makes more sense to opt for ITM (in-the-money) options to capture swing movement. (also called a Time Spread) allows an investor the ability to take advantage of the passage of time in a hedged manner. Your potential loss is limited to only what you spent in purchasing the spread.   Finally, “morphs” to other types of strategies will also be quite easy to implement when starting with these as a base.

Vertical Call & Put Spreads are most applicable in certain type of implied volatility environments and are also warranted when Technical Analysis criteria are in place and are suggesting a less aggressive stance the Long Call or Long Put strategy.  For those and other reasons Verticals will be put to use when the situation calls for them.  In short, verticals help to reduce overall risk but, “unmorphed”, they will also limit potential gains on trades.  They generally are best applied in highly volatile markets wherein options carry prohibitively high premium levels.

Diagonal spreads are a combination of calendar spread and a vertical.  This spread for bullish trades involves buying longer terms options usually ITM and selling shorter term, higher strike options that are OTM.  This allows the trader to let the stock rise, and the long term option to appreciate in value, up to the near term short strike.  Diagonals are great for stocks that will trend in one direction.  As with Calendars, volatility plays an important role when pricing these spreads. Potential loss is the amount invested in the spread. 

Calendar Spreads(also called Time Spreads) allows an investor the ability to take advantage of the passage of time in a hedged manner. Your potential loss is limited to only what you spent in purchasing the spread.  Involves the same class and strike, but different expirations.

Butterflies and Condors are strategies that involve multiple option positions. They are aggressive premium collection strategies but have an additional hedging component which provides for a limited loss. This limited loss comes at the expense of profit, which means butterflies and condors are not as risky or as profitable as straddles and strangles. Investors use butterflies and condors when they are not as confident about the consolidating pattern and believe that they need a little extra protection to adjust for risks of premium collection strategies.