option strategies the fundamental of listed options what options are what makes up an option the...
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![Page 1: Option Strategies The fundamental of Listed Options What options are What makes up an Option The benefits of Trading options How rights and obligations](https://reader036.vdocuments.net/reader036/viewer/2022062315/5697bffa1a28abf838cc0454/html5/thumbnails/1.jpg)
Option Strategies
The fundamental of Listed OptionsWhat options areWhat makes up an OptionThe benefits of Trading optionsHow rights and obligations are involved with optionsWhat it means to have a long or short positionThe core strategies
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Long Call• Strategy: Long Stock• Example: Buy Stock at $50.00• Breakeven Point: $50.00• Maximum Risk: $50.00• Profit Potential: Unlimited
Long Stock
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Pro
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Long Stock
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Short Stock• Strategy: Short Stock• Example: Sell Short Stock at $50.00• Breakeven Point: $50.00• Maximum Risk: Unlimited• Profit Potential: $50
Short Stock
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Short Stock
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Long Call• Strategy: Long Call• Example: Long Strike $50.00 at $5.00• Breakeven Point: $55.00• Maximum Risk: $5.00• Profit Potential: Unlimited
Long Call
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Stock Price
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Long Call
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Short Call• Strategy: Sell Short Call• Example: Sell Short Strike $50.00 Call at $5.00• Breakeven Point: $50.00• Maximum Risk: Unlimited• Profit Potential: $5.00
Short Call
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Stock Price
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Short Call
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Long Put• Strategy: Long Put• Example: Long Strike $50.00 Put at $5.00• Breakeven Point: $45.00• Maximum Risk: $5.00• Profit Potential: $45.00
Long Put
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Stock Price
Pro
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Long Put
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Short Put• Strategy: Short Put• Example: Sell Short Strike $50.00 Put at $5.00• Breakeven Point: $45.00• Maximum Risk: $45.00• Profit Potential: $5.00
Short Put
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30 32.5 35 37.5 40 42.5 45 47.5 50 52.5 55 57.5 60 62.5 65 67.5 70
Stock Price
Pro
fit
Short Put
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Long Straddle• Strategy: Long Call, Long Put• Example: Long Strike $50.00 Call at $5.00 and Put at $5.00• Breakeven Point: $40.00 & $60.00• Maximum Risk: $10.00• Profit Potential: $40.00 or Unlimited
Long Straddle
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Stock Price
Pro
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Long CallLong PutLong Straddle
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Short Straddle• Strategy: Short Call, Short Put• Example: Sell Short Strike $50.00 Call at $5.00 and Put at
$5.00• Breakeven Point: $40.00 & $60.00• Maximum Risk: $40.00 or Unlimited• Profit Potential: $10.00
Short Straddle
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Stock Price
Pro
fit
Short CallShort PutShort Straddle
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Long Strangle• Strategy: Long Call, Long Put• Example: Long Strike $53.00 Call at $5.00 and Strike $50.00 Put at $5.00• Breakeven Point: $40.00 & $63.00• Maximum Risk: $10.00• Profit Potential: $40.00 or Unlimited
Long Strangle
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Stock Price
Pro
fit
Long CallLong PutLong Strangle
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Short Strangle• Strategy: Short Call, Short Put• Example: Sell Short Strike $50.00 Call at $5.00 and Strike $47.00 Put at $5.00• Breakeven Point: $37.00 & $60.00• Maximum Risk: $37.00 or Unlimited• Profit Potential: $10.00
Short Strangle
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Stock Price
Pro
fit
Short CallShort PutShort Strangle
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Covered Call• Strategy: Long Stock, Short Call• Example: Buy Stock at $50.00, Sell Short Strike $50.00 Call at $5.00• Breakeven Point: $45.00• Maximum Risk: $45.00• Profit Potential: $5.00
Covered Call
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Stock Price
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Long StockShort CallCovered Call
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Covered Put• Strategy: Short Stock, Long Put• Example: Sell Short Stock at $50.00, Long Strike $50.00 Call at $5.00• Breakeven Point: $55.00• Maximum Risk: Unlimited• Profit Potential: $5.00
Covered Call
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Stock Price
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Short StockShort PutCover Put
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Ratio Call• Strategy: Long Call, Short Calls at Higher Strike • Example: Long Strike at $50.00 Call at $5.00, Sell Short Strike
$70.00 3-Calls at $1.00• Breakeven Point: $52.00 & $76.00• Maximum Risk: $2.00 & Unlimited• Profit Potential: $16.00
Ratio Call
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Stock Price
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fit
Long CallShort CallLong Straddle
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Ratio Put• Strategy: Long Put, Short Puts at Lower Strike • Example: Long Strike at $50.00 Put at $5.00, Sell Short Strike
$30.00 3-Puts at $1.00• Breakeven Point: $24.00 & $48.00• Maximum Risk: $48.00 & $2.00• Profit Potential: $16.00
Ratio Put
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Stock Price
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fit
Long PutShort PutLong Straddle
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Bull Call Spread• Strategy: Long Call at Lower Strike, Short Call at Higher Strike• Example: Long Strike at $45.00 Call at $10.00, Sell Short Strike
$65.00 Call at $5.00• Breakeven Point: $50.00• Maximum Risk: $5.00• Profit Potential: $5.00
Bull Call Spread
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Stock Price
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fit
Long CallShort CallLong Straddle
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Bearish Put Spread• Strategy: Long Put at Lower Strike, Short Put at Higher Strike• Example: Long Strike at $55.00 Put at $10.00, Sell Short Strike
$35.00 Call at $5.00• Breakeven Point: $50.00• Maximum Risk: $5.00• Profit Potential: $5.00
Bearish Put Spread
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Stock Price
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fit
Long PutShort PutLong Straddle