Professional Documents
Culture Documents
Options Strategies
Options Strategies
Action
When to use
Risk
Reward
Break-even Point
Unlimited
Unlimited
stock / index
Limited
to
the
amount of premium
Call
Put Option
87 | P a g e
Profit potential is
unlimited.
Price
Short Put
Covered Call
88 | P a g e
to
amount
the
of Stock Price - Premium
Premium paid.
Limited
Limited
amount
to
the
of
Premium received
Put
Strike
Price
Premium
but
retains
the
write".
Long Combo :
Sell a Put, Buy
a Call
the stock.
Unlimited
Short
Stock
Maximum is Stock
Call
Premium
Stock
Price
Call
Premium
Covered Put
Long Straddle
89 | P a g e
Short Stock +
Short Put Option
the
markets
are the
moderately bearish.
stock
rises
substantially
Maximum is (Sale
Price of the Stock
Call
Unlimited
Unlimited
Limited
to
the
premium received
Lower
Point
90 | P a g e
when
the
thinks
underlying
options
that
stock
the
will
Limited
Unlimited
to
the
premium received
Lower
Point
Collar
Purchase
Limited
Underlying
Price
of
Call
to
the
Price
of
in difference between Strike
establishing the position. the two strikes Purchased call + Net
Maximum loss occurs minus net premium Debit Paid
premium
paid
where
underlying cost.
the
Maximum
strike (OTM)
strike
or
above
When
the
investor
moderately bullish
Put Option
is
occurs
where
the
premium
credit.
Maximum
profit
occurs
strike
or
above.
Bear
Call
strike
92 | P a g e
Strike
Net
strike
Limited
to
the
amount
paid
for
net Limited
the
to
two
strike
paid for long position prices minus the - Net Premium Paid
less premium received net premium paid
strike (OTM)
Difference between
on
adjacent
market
direction
bearish on volatility.
strikes
Point
93 | P a g e
and
bullish
to
the
net
Call + Sell 1 ITM Call volatility. Neutral means that adjacent strikes (Rs. 100 premium received Premium
+
Sell
1 you expect the market to move in this example) less the for
OTMCall
the
Received
and bearish.
position.
Premium Received
(Lower
Strike),
Sell
(Higher
Middle), Buy 1
OTM Call Option
(Higher Strike)
94 | P a g e
lower
strike
call
Limited.
The
Lower
Point
strike Debit
(Lower
Limited.
Strike), Long 1
ITM
Short
Condor
Call
option
Call
95 | P a g e
(Higher
The
maximum profit of
Limited. The maximum a
short
condor
index
is
trading
= Lowest