View
223
Download
4
Category
Preview:
Citation preview
Option Strategies
The fundamental of Listed OptionsWhat options areWhat makes up an OptionThe benefits of Trading optionsHow rights and obligations are involved with optionsWhat it means to have a long or short positionThe core strategies
Long Call• Strategy: Long Stock• Example: Buy Stock at $50.00• Breakeven Point: $50.00• Maximum Risk: $50.00• Profit Potential: Unlimited
Long Stock
-15
-10
-5
0
5
10
15
30 32.5 35 37.5 40 42.5 45 47.5 50 52.5 55 57.5 60 62.5 65 67.5 70
Stock Price
Pro
fit
Long Stock
Short Stock• Strategy: Short Stock• Example: Sell Short Stock at $50.00• Breakeven Point: $50.00• Maximum Risk: Unlimited• Profit Potential: $50
Short Stock
-15
-10
-5
0
5
10
15
30 32.5 35 37.5 40 42.5 45 47.5 50 52.5 55 57.5 60 62.5 65 67.5 70
Stock Price
Pro
fit
Short Stock
Long Call• Strategy: Long Call• Example: Long Strike $50.00 at $5.00• Breakeven Point: $55.00• Maximum Risk: $5.00• Profit Potential: Unlimited
Long Call
-15
-10
-5
0
5
10
15
30 32.5 35 37.5 40 42.5 45 47.5 50 52.5 55 57.5 60 62.5 65 67.5 70
Stock Price
Pro
fit
Long Call
Short Call• Strategy: Sell Short Call• Example: Sell Short Strike $50.00 Call at $5.00• Breakeven Point: $50.00• Maximum Risk: Unlimited• Profit Potential: $5.00
Short Call
-15
-10
-5
0
5
10
15
30 32.5 35 37.5 40 42.5 45 47.5 50 52.5 55 57.5 60 62.5 65 67.5 70
Stock Price
Pro
fit
Short Call
Long Put• Strategy: Long Put• Example: Long Strike $50.00 Put at $5.00• Breakeven Point: $45.00• Maximum Risk: $5.00• Profit Potential: $45.00
Long Put
-15
-10
-5
0
5
10
15
30 32.5 35 37.5 40 42.5 45 47.5 50 52.5 55 57.5 60 62.5 65 67.5 70
Stock Price
Pro
fit
Long Put
Short Put• Strategy: Short Put• Example: Sell Short Strike $50.00 Put at $5.00• Breakeven Point: $45.00• Maximum Risk: $45.00• Profit Potential: $5.00
Short Put
-15
-10
-5
0
5
10
15
30 32.5 35 37.5 40 42.5 45 47.5 50 52.5 55 57.5 60 62.5 65 67.5 70
Stock Price
Pro
fit
Short Put
Long Straddle• Strategy: Long Call, Long Put• Example: Long Strike $50.00 Call at $5.00 and Put at $5.00• Breakeven Point: $40.00 & $60.00• Maximum Risk: $10.00• Profit Potential: $40.00 or Unlimited
Long Straddle
-15
-10
-5
0
5
10
15
30 32.5 35 37.5 40 42.5 45 47.5 50 52.5 55 57.5 60 62.5 65 67.5 70
Stock Price
Pro
fit
Long CallLong PutLong Straddle
Short Straddle• Strategy: Short Call, Short Put• Example: Sell Short Strike $50.00 Call at $5.00 and Put at
$5.00• Breakeven Point: $40.00 & $60.00• Maximum Risk: $40.00 or Unlimited• Profit Potential: $10.00
Short Straddle
-15
-10
-5
0
5
10
15
30 32.5 35 37.5 40 42.5 45 47.5 50 52.5 55 57.5 60 62.5 65 67.5 70
Stock Price
Pro
fit
Short CallShort PutShort Straddle
Long Strangle• Strategy: Long Call, Long Put• Example: Long Strike $53.00 Call at $5.00 and Strike $50.00 Put at $5.00• Breakeven Point: $40.00 & $63.00• Maximum Risk: $10.00• Profit Potential: $40.00 or Unlimited
Long Strangle
-15
-10
-5
0
5
10
15
30 32.5 35 37.5 40 42.5 45 47.5 50 52.5 55 57.5 60 62.5 65 67.5 70
Stock Price
Pro
fit
Long CallLong PutLong Strangle
Short Strangle• Strategy: Short Call, Short Put• Example: Sell Short Strike $50.00 Call at $5.00 and Strike $47.00 Put at $5.00• Breakeven Point: $37.00 & $60.00• Maximum Risk: $37.00 or Unlimited• Profit Potential: $10.00
Short Strangle
-15
-10
-5
0
5
10
15
30 32.5 35 37.5 40 42.5 45 47.5 50 52.5 55 57.5 60 62.5 65 67.5 70
Stock Price
Pro
fit
Short CallShort PutShort Strangle
Covered Call• Strategy: Long Stock, Short Call• Example: Buy Stock at $50.00, Sell Short Strike $50.00 Call at $5.00• Breakeven Point: $45.00• Maximum Risk: $45.00• Profit Potential: $5.00
Covered Call
-15
-10
-5
0
5
10
15
30 32.5 35 37.5 40 42.5 45 47.5 50 52.5 55 57.5 60 62.5 65 67.5 70
Stock Price
Pro
fit
Long StockShort CallCovered Call
Covered Put• Strategy: Short Stock, Long Put• Example: Sell Short Stock at $50.00, Long Strike $50.00 Call at $5.00• Breakeven Point: $55.00• Maximum Risk: Unlimited• Profit Potential: $5.00
Covered Call
-15
-10
-5
0
5
10
15
30 32.5 35 37.5 40 42.5 45 47.5 50 52.5 55 57.5 60 62.5 65 67.5 70
Stock Price
Pro
fit
Short StockShort PutCover Put
Ratio Call• Strategy: Long Call, Short Calls at Higher Strike • Example: Long Strike at $50.00 Call at $5.00, Sell Short Strike
$70.00 3-Calls at $1.00• Breakeven Point: $52.00 & $76.00• Maximum Risk: $2.00 & Unlimited• Profit Potential: $16.00
Ratio Call
-10
-5
0
5
10
15
20
40 42.5 45 47.5 50 52.5 55 57.5 60 62.5 65 67.5 70 72.5 75 77.5 80
Stock Price
Pro
fit
Long CallShort CallLong Straddle
Ratio Put• Strategy: Long Put, Short Puts at Lower Strike • Example: Long Strike at $50.00 Put at $5.00, Sell Short Strike
$30.00 3-Puts at $1.00• Breakeven Point: $24.00 & $48.00• Maximum Risk: $48.00 & $2.00• Profit Potential: $16.00
Ratio Put
-15
-10
-5
0
5
10
15
20 22.5 25 27.5 30 32.5 35 37.5 40 42.5 45 47.5 50 52.5 55 57.5 60
Stock Price
Pro
fit
Long PutShort PutLong Straddle
Bull Call Spread• Strategy: Long Call at Lower Strike, Short Call at Higher Strike• Example: Long Strike at $45.00 Call at $10.00, Sell Short Strike
$65.00 Call at $5.00• Breakeven Point: $50.00• Maximum Risk: $5.00• Profit Potential: $5.00
Bull Call Spread
-15
-10
-5
0
5
10
15
30 32.5 35 37.5 40 42.5 45 47.5 50 52.5 55 57.5 60 62.5 65 67.5 70
Stock Price
Pro
fit
Long CallShort CallLong Straddle
Bearish Put Spread• Strategy: Long Put at Lower Strike, Short Put at Higher Strike• Example: Long Strike at $55.00 Put at $10.00, Sell Short Strike
$35.00 Call at $5.00• Breakeven Point: $50.00• Maximum Risk: $5.00• Profit Potential: $5.00
Bearish Put Spread
-15
-10
-5
0
5
10
15
30 32.5 35 37.5 40 42.5 45 47.5 50 52.5 55 57.5 60 62.5 65 67.5 70
Stock Price
Pro
fit
Long PutShort PutLong Straddle
Recommended