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Options strategies table

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options strategies table

Getting Started with Strategies Strategies Advanced Concepts. Why Add Options To Your Practice? A bear call spread is a limited-risk-limited-reward strategy, consisting of one short call option and one long call option. This strategy generally profits if the stock price holds steady or declines. The most it can generate is the net premium strategies at the outset. If the forecast is wrong and the stock rallies instead, the losses grow only until long call caps the amount.

A bear put spread consists of buying one put and selling another put, at a lower strike, to offset part of the upfront cost. The spread generally profits if the stock price moves lower. The potential profit is limited, but so is the risk should the stock unexpectedly rally.

This strategy consists of buying one call option and selling another at a higher strike price to help pay the cost. The spread generally profits if the stock price moves higher, just as a regular long call options would, up to the point where the short call caps further gains. A bull put spread is a limited-risk-limited-reward strategy, consisting of a short put option and a long put option with a lower strike.

This spread generally profits if the stock price holds steady or rises. This strategy allows an investor to purchase stock at the lower of strike price or market price during the life of the option. The cash-secured put involves writing a put option and simultaneously setting aside the cash to buy the stock if assigned. If things go as hoped, it allows an investor to buy the stock at a price below its current market value.

The investor must be prepared for the possibility that the put won't be assigned. In that case, the investor simply keeps the interest on the T-Bill and the premium received for selling the put option. The investor adds a collar to an existing long stock position as a temporary, slightly less-than-complete hedge against the table of a possible near-term decline. The long put strike provides a minimum selling price for the stock, and the short call strike sets a maximum price. This strategy consists of writing a call that is covered by an equivalent long stock position.

It provides a small hedge on the stock and allows an investor to earn premium income, in strategies for temporarily forfeiting much of the stock's upside potential. This strategy is used to arbitrage a put that is overvalued because of its early-exercise feature. The investor simultaneously sells an in-the-money put at options intrinsic value and shorts the stock, and then invests the proceeds in an instrument earning strategies overnight interest rate.

When the option is exercised, the position liquidates at breakeven, but the investor keeps the interest earned. This strategy profits if the underlying stock moves up to, but not above, the strike price of the short calls.

Beyond that, the profit is eroded and then hits a plateau. This strategy is appropriate for a stock considered to be fairly valued. The investor has a long stock position and is willing to sell the stock if it goes higher or buy more of the stock if it goes lower. This strategy consists of buying a call option. It is a candidate for investors who want a chance to participate in the underlying stock's expected appreciation during the term of the option. If things go as planned, the investor will be able to sell the call at a profit at some point before expiration.

If the underlying stock remains steady or declines during the life of the near-term option, that option will expire worthless and leave the investor owning table longer-term option free and clear. If both options have the same strike price, the strategy will always require paying a premium to initiate the position.

This strategy profits if the underlying security is between the two short call strikes at expiration. This strategy profits if the underlying stock is outside the wings of the iron butterfly at expiration. This strategy consists of buying puts as a table to profit if the stock price moves lower. It is a candidate for bearish investors who want to participate in an anticipated downturn, but without the risk and inconveniences of selling the stock short.

If the stock remains steady or rises during the life of the near-term option, it will expire worthless and leave the investor owning the longer-term option. This strategy profits if the underlying security is between the two short put strikes at expiration.

The initial cost to initiate this strategy is rather low, and may even earn a credit, but the upside strategies is unlimited. The basic concept is for the total delta of the two long calls to roughly equal the delta of the single short call. If the underlying stock only moves a little, the change in value of the option position will be limited. But if the stock rises enough to where the total delta of the two long calls approaches the strategy acts like a long stock position.

The initial cost to initiate this strategy is rather low, and may even earn a credit, but the downside potential is substantial. The basic concept is for the total delta of the two long puts to roughly equal the delta of the single short put. But if the stock declines enough to where the total delta of the two long puts approaches the strategy acts like a short stock position.

This strategy is simple. It consists of acquiring stock in anticipation of rising prices. The gains, if there are any, are realized only when the asset is sold. Until that time, the investor faces the possibility of partial or total loss of the investment, should the stock lose value.

In principle, this strategy imposes no fixed timeline. However, special circumstances could delay or accelerate an exit. For example, a margin purchase is subject to margin calls at any time, which could force a quick sale unexpectedly.

This strategy consists of buying a call option and a put option with the same strike price and expiration. The combination generally profits if the stock price moves sharply in either direction during the life of the options. This strategy profits if the stock price moves sharply in either direction during the life of the option. This strategy consists of writing an uncovered call option.

It profits if the stock price holds steady or declines, and does best if the option expires worthless. A naked put involves writing a put option without the reserved cash on hand to purchase the underlying stock. This strategy entails a great deal of risk and relies on a steady or rising stock price. It does best if the option expires worthless. This strategy consists of adding a long put position to a long stock position.

The protective put establishes a 'floor' price under which investor's stock value cannot fall. If the stock keeps rising, the investor benefits from the upside gains. Yet no matter how low the stock might fall, the investor can exercise the strategies to liquidate the stock at the strike price. This strategy profits if the underlying stock is outside the wings of the butterfly at expiration. This strategy profits from the different characteristics of near and longer-term call options.

If the stock holds steady, the strategy suffers from time decay. If the underlying stock moves sharply up or down, both options will move toward their intrinsic value or zero, thus narrowing the difference between their values.

If both options have the same strike price, the strategy will always receive a premium when initiating the position. This strategy options if the underlying stock is inside the wings of the iron butterfly at expiration. This strategy profits from the different characteristics of near and longer-term put options. If the underlying stock holds steady, the strategy suffers from time decay.

If the stock moves sharply up or down, both options will move toward their intrinsic value or zero, thus narrowing the difference between their values. A candidate for bearish investors who wish to profit from a depreciation in the stock's price. The strategy involves borrowing stock through the brokerage firm and selling the shares in the marketplace at the prevailing price.

The goal is to buy them back later at a lower price, thereby locking in a profit. This strategy involves selling a call option and a put option with the same expiration and strike price. It generally profits if the stock price and volatility remain steady.

This strategy profits if the stock price and volatility remain steady during the life of the options. This strategy can profit from a steady stock price, or from a falling implied volatility. The actual behavior of the strategy depends largely on the delta, theta and Vega of the combined position as well as whether a debit is paid or a credit received when initiating the position.

This strategy can profit from a slightly falling stock price, or from a rising stock price. The actual behavior of the strategy depends largely on the delta, theta and vega of the combined position as well as whether a debit is paid or a credit received when initiating the position. This strategy combines a long call and a short stock position. Its payoff profile is equivalent to a long put's characteristics. The strategy profits if the stock price moves lower--the more dramatically, the better.

The time horizon is limited to the life of the option. This strategy is essentially a long futures position on the underlying stock.

The long call and the short put combined simulate a long stock position. This strategy is essentially a short futures position on the underlying stock. The long put and the short call combined simulate a short stock position. This web site discusses exchange-traded options issued by The Options Clearing Corporation. No statement in this table site is to be construed as a recommendation to purchase or sell a security, or to provide investment advice.

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies of this document may be obtained from your broker, from any exchange on which options are traded or by contacting The Options Clearing Corporation, One North Wacker Dr. Please view our Privacy Policy and our User Agreement.

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Objective Acquire Stock Hedge Stock Produce Income. Implied Volatility Increase Decrease. This strategy profits if the underlying stock is at the body of the butterfly at expiration. This strategy profits if the underlying stock is outside the outer wings at expiration. In some cases the stock may generate dividend income.

This strategy profits if the underlying stock is inside the inner wings at expiration. Email Live Chat Email Options Professionals Questions about anything options-related? Email an options professional now. Chat with Options Professionals Questions about anything options-related? Chat with an options professional now. REGISTER FOR THE OPTIONS EDUCATION PROGRAM. More Info Register Now. Strategies - Getting Started. Options Strategies in a Neutral Market Course.

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Option Strategy - Butterfly Spread

Option Strategy - Butterfly Spread options strategies table

5 thoughts on “Options strategies table”

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