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Cheat Sheet
Cheat Sheet
C Type of Option
D Explanation
In the Money At the Money Out of the Money In the Money At the Money Out of the Money
2 Sell
3 Covered Call writing 4 Covered Sell writing 5 Option Strategies Stock price increasing you protect it buying a put with Strike Price(SP) < stock and selling call with SP > stock
15 16
Collar
17 18 19
Repair
Stock price is down so buy a call where SP = current stock price and sell a call with SP > current stock price
Long term options 1-3 yrs in time only most widely traded stocks have LEAP options Options moves delta times the underlting stock
G Adv./Disadv. 1 2 3 4 5 6 7 8 9 10 11 12 13 14
H Time Value
I Intrinsic Value
Lowers Insurance cost(better than buying just put), reduces risk and protects profits,removes downside risk and allows upside 15 potential 16 Stock is down 20-30% and want to breakeven or make small profit, reduce paper loss without 17 expense 18 19
L Maximum Loss 1 2 3 4 5 6 7 8 9 10 11 12 13 14
15 16
17 18 19
20 21 22
CALL
PUT
Bearish - you want the Bullish - you want the stock price to go down stock price to go up
Debit Spreads - Formulae Call Total Debit (TD) Sell Pr - Buy Pr Maximum gain Max loss Break even (SP1-SP2) - TD Sell Pr - Call Pr Long(Buy) SP + TD
Credit Spreads - Formulae Call Total Credit (TC) Sell Pr - Buy Pr Maximum gain Max loss Break even Total Credit (SP1-SP2)-TC Short(Sell)+TC
S No 1 Buy Call
Explanation
Buy PUT In the money At the money Out of the money 2 Sell CALL In the Money At the Money Out of the Money Sell PUT In the money At the money Out of the money 3 Covered Call writing 4 Covered Sell writing 5 Option Strategies
Collar
Stock price increasing you protect it buying a put with Strike Price(SP) < stock and selling call with SP > stock Stock price is down so buy a call where SP = current stock price and sell a call with SP > current stock price
Repair
Long term options 1-3 yrs in time only most widely traded stocks have LEAP options Options moves delta times the underlting stock
8 Index Options
Options traded on the index like S&P 100/500 OEX - S&p 100, SPX - S&P 500 etc Works the same as stock call option
Buy CALL In the money At the money Out of the money Buy PUT In the money At the money Out of the money
INDEX OPTION - TYPES type 1 STRADDLE Debit Credit 2 STRANGLE Debit Credit 3 SPREADS Debit Bull call spread Vertical Bear put spread Credit Debit Credit Bull put spread Bear call spread
purchased/sold
Long Call SP < Stock Price < Short Call SP Short Put SP < Stock Price < Long Put SP Buy Put SP < Stock Price < Sell put SP Sell call SP < Stock Price < buy call SP
3 SPREADS Vertical
Adv./Disadv.
Time Value
Intrinsic Value
Break even
Lowers Insurance cost(better than buying just put), reduces risk and protects profits,removes downside risk and allows upside potential Stock is down 20-30% and want to breakeven or make small profit, reduce paper loss without expense
SP < Stock Price < Short Call SP t SP < Stock Price < Long Put SP
moderate rise in stock price moderate fall in stock price moderate rise in stock price moderate fall in stock price
SP < Stock Price < Sell put SP P < Stock Price < buy call SP
why options enhance portfolio,provides flexibility,opportunities in bull,bear and neutral markets Option Tradings - OMEX etc OCC regulates all option trading Buy Call - right to buy @ specific time within specifed period of the time Buy Put - right to sell @ specific time within specifed period of the time right purchased from seller of the premium Type - call /put strike price premium Sell Call - obigated to buy from the buyer at the specified time within the specified time Sell Put - obligated to sell to the buyer at the specified time within the specified time option exercise process expiration exercise option one of 3 expiration cycle exercising - notice to occ before cut off time CALL stock @ 10 Time Value Intrinsic value Premium In the money (8) 3 2 5 Out of the money (15) 3 0 3 At the money (10) 4 0 4 PUT stock @ 10 In the money (12) Out of the money (8) At the money (10) Time Value 2 2 1 Intrinsic value 2 0 0 Premium 4 2 1