9.

Trading Strategies
Involving Options

Chapter 9
 9.2

Trading Strategies Involving Options

• Take a position in the option and the

underlying
• Take a position in 2 or more options of
the same type
– This is known as a spread
• Take a position in a mixture of calls &
puts
– This is known as a combination
Positions in an Option & the 9.3

Underlying

Profit Profit

X
X ST ST
(a)
(b
Profit Profit )

X
ST X ST

(c (d
) )
 9.4

Bull Spread Using Calls

Profit

ST
X1 X2
 9.5

Bull Spread Using Puts

Profit

X1 X2 ST
 9.6

Bear Spread Using Calls

Profi
t

X1 X2 ST
 9.7

Bear Spread Using Puts

Profit

X1 X2 ST
 9.8

Butterfly Spread Using Calls

Profit

X1 X2 X3 ST
 9.9

Butterfly Spread Using Puts

Profit

X1 X2 X3 ST
 9.10

Calendar Spread Using Calls

Profit

ST
X
 9.11

Calendar Spread Using Puts

Profit

ST
X
 9.12

A Straddle Combination

Profit

X ST
 9.13

Strip & Strap

Profit Profit

X ST X ST

Strip Strap
 9.14

A Strangle Combination

Profit

X1 X2
ST