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OPTIONS & DERIVATIVES TRADING OPTIONS TRADING STRATEGY & EDUCATION

()$%*+$,-.
F: %JAMES CHEN % G H+?#$8?%*5$-982%IJ;%KLKI

M87,8B8?%9: %THOMAS BROCK


N#5$%5"85E8?%9: %ARIEL COURAGE

TABLE OF CONTENTS
!"#$%&'%#%()$%*+$,-./
O-B%#%()$%*+$,-.%!-2E'
!"828%$-%D2#?8%*+$,-.'
PQ825,',.6%#%()$%*+$,-.
EXPAND +
PQ#@+<8%->%#%()$%*+$,-.

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-9<,6#$,-.;%$-%'8<<=-2%'8<<%'"-2$=#%'+85,>,8?%#@-).$%->%#.%).?82<:,.6%'85)2,$:%#$%#%+28A
?8$82@,.8?%+2,58%B,$",.%#%'+85,>,8?%$,@8%>2#@8C%D",'%+28A?8$82@,.8?%+2,58%#$%B",5"
$"8%9):82%->%$"8%+)$%-+$,-.%5#.%'8<<%$"8%).?82<:,.6%'85)2,$:%,'%5#<<8?%$"8%'$2,E8%+2,58C
:
()$%-+$,-.'%#28%$2#?8?%-.%7#2,-)'%).?82<:,.6%#''8$';%,.5<)?,.6%'$-5E';%5)228.5,8';
9-.?';%5-@@-?,$,8';%>)$)28';%#.?%,.?8Q8'C%0%+)$%-+$,-.%5#.%98%5-.$2#'$8?%B,$"%#%5#<<
-+$,-.;%B",5"%6,78'%$"8%"-<?82%$"8%2,6"$%$-%9):%$"8%).?82<:,.6%#$%#%'+85,>,8?%+2,58;
8,$"82%-.%-2%98>-28%$"8%8Q+,2#$,-.%?#$8%->%$"8%-+$,-.%5-.$2#5$C

KEY TAKEAWAYS
()$%-+$,-.'%6,78%"-<?82'%->%$"8%-+$,-.%$"8%2,6"$;%9)$%.-$%$"8%-9<,6#$,-.;%$-
'8<<%#%'+85,>,8?%#@-).$%->%#.%).?82<:,.6%'85)2,$:%#$%#%'+85,>,8?%+2,58%B,$",.%#
'+85,>,8?%$,@8%>2#@8C
()$%-+$,-.'%#28%#7#,<#9<8%-.%#%B,?8%2#.68%->%#''8$';%,.5<)?,.6%'$-5E';
,.?8Q8';%5-@@-?,$,8';%#.?%5)228.5,8'C
()$%-+$,-.%+2,58'%#28%,@+#5$8?%9:%5"#.68'%,.%$"8%+2,58%->%$"8%).?82<:,.6
#''8$;%$"8%-+$,-.%'$2,E8%+2,58;%$,@8%?85#:;%,.$828'$%2#$8';%#.?%7-<#$,<,$:C
()$%-+$,-.'%,.528#'8%,.%7#<)8%#'%$"8%).?82<:,.6%#''8$%>#<<'%,.%+2,58;%#'
7-<#$,<,$:%->%$"8%).?82<:,.6%#''8$%+2,58%,.528#'8';%#.?%#'%,.$828'$%2#$8'
?85<,.8C
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).?82<:,.6%#''8$%+2,58%?8528#'8';%#'%,.$828'$%2#$8'%2,'8;%#.?%#'%$"8%$,@8%$-
8Q+,2#$,-.%.8#2'C
:
Put Option Basics

O-B%#%()$%*+$,-.%!-2E'
0%+)$%-+$,-.%985-@8'%@-28%7#<)#9<8%#'%$"8%+2,58%->%$"8%).?82<:,.6%'$-5E%-2%'85)2,$:
?8528#'8'C%R-.782'8<:;%#%+)$%-+$,-.%<-'8'%,$'%7#<)8%#'%$"8%+2,58%->%$"8%).?82<:,.6
'$-5E%,.528#'8'C%0'%#%28')<$;%$"8:%#28%$:+,5#<<:%)'8?%>-2%"8?6,.6%+)2+-'8'%-2%$-
'+85)<#$8%-.%?-B.',?8%+2,58%#5$,-.C
:
&.78'$-2'%->$8.%)'8%+)$%-+$,-.'%,.%#%2,'EA@#.#68@8.$%'$2#$86:%E.-B.%#'%#%+2-$85$,78
+)$;%B",5"%,'%)'8?%#'%#%>-2@%->%,.78'$@8.$%,.')2#.58%-2%"8?68%$-%8.')28%$"#$%<-''8'
,.%$"8%).?82<:,.6%#''8$%?-%.-$%8Q588?%#%582$#,.%#@-).$C%&.%$",'%'$2#$86:;%$"8%,.78'$-2
9):'%#%+)$%-+$,-.%$-%"8?68%?-B.',?8%2,'E%,.%#%'$-5E%"8<?%,.%$"8%+-2$>-<,-C%&>%#.?%B"8.
$"8%-+$,-.%,'%8Q825,'8?;%$"8%,.78'$-2%B-)<?%'8<<%$"8%'$-5E%#$%$"8%+)$S'%'$2,E8%+2,58C%&>
$"8%,.78'$-2%?-8'%.-$%"-<?%$"8%).?82<:,.6%'$-5E;%#.?%8Q825,'8'%#%+)$%-+$,-.;%$",'
B-)<?%528#$8%#%'"-2$%+-',$,-.%,.%$"8%'$-5EC

Factors that Affect a Put's Price


&.%68.82#<;%$"8%7#<)8%->%#%+)$%-+$,-.%?8528#'8'%#'%,$'%$,@8%$-%8Q+,2#$,-.%#++2-#5"8'
985#)'8%->%$"8%,@+#5$%->%$,@8%?85#:C%D,@8%?85#:%#558<82#$8'%#'%#.%-+$,-.S'%$,@8%$-
8Q+,2#$,-.%?2#B'%5<-'82%',.58%$"828S'%<8''%$,@8%$-%28#<,T8%#%+2->,$%>2-@%$"8%$2#?8C%!"8.
#.%-+$,-.%<-'8'%,$'%$,@8%7#<)8;%$"8%,.$2,.',5%7#<)8%,'%<8>$%-782C%0.%-+$,-.S'%,.$2,.',5
7#<)8%,'%8U),7#<8.$%$-%$"8%?,>>828.58%98$B88.%$"8%'$2,E8%+2,58%#.?%$"8%).?82<:,.6
'$-5E%+2,58C%&>%#.%-+$,-.%"#'%,.$2,.',5%7#<)8;%,$%,'%28>8228?%$-%#'%,.%$"8%@-.8:%1&DV4C

PART OF
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-)$%->%$"8%@-.8:%+)$%-+$,-.%#$%#.%).?8',2#9<8%'$2,E8%+2,58C%O-B8782;%-)$',?8%->%#
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,@+-2$#.$%->%B",5"%,'%$"8%$,@8%28@#,.,.6%$-%8Q+,2#$,-.C%0'')@8%$"#$%$"8%]fK`%+)$%,'
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SELLING VS. EXERCISING AN OPTION


D"8%@#l-2,$:%->%<-.6%-+$,-.%+-',$,-.'%$"#$%"#78%7#<)8%+2,-2%$-%8Q+,2#$,-.%#28
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28U),28@8.$'C

Writing Put Options


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,.%$"8%-+$,-.%5-.$2#5$C

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