Options Strategies

Bear Call Spread

A bear call spread typically consists of: selling a lower strike call and buying a higher strike call with the same expiration. Market view Bearish...

Bear Put Spread

A bear put spread typically consists of: buying a higher strike put and selling a lower strike put with the same expiration. Market view Moderately...

Bull Call Spread

A bull call spread typically consists of: buying a lower strike call and selling a higher strike call with the same expiration. Market view Moderat...

Bull Put Spread

A bull put spread typically consists of: selling a higher strike put and buying a lower strike put with the same expiration. Market view Bullish to...

Butterfly Spread

A butterfly spread is a multi leg strategy using options at three strike levels to create a defined payoff concentrated around a central region. Se...

Buy Write

A buy write strategy involves buying the underlying asset and selling a call against it as part of the strategy.

Calendar Spread

A calendar spread combines options on the same underlying and typically the same strike but with different expiration dates.

Cash Secured Put

A cash secured put involves selling a put while setting aside sufficient cash to meet the purchase obligation if assigned under the intended contra...

Collar

A collar typically combines: ownership of the underlying, a protective put, and a short call.

Covered Call

A covered call combines ownership of the underlying asset with a short call against that position. A common equity implementation is: Own 100 share...

Credit Spread

A credit spread is an options spread established for a net premium received.

Debit Spread

A debit spread is an options spread that requires a net premium payment to establish.

Defined Risk

Defined risk describes a position where the maximum potential loss can be determined in advance from the structure of the trade, subject to the con...

Diagonal Spread

A diagonal spread combines options with both: different strikes and different expiration dates.

Iron Butterfly

An iron butterfly combines a short call and short put around the same central strike with protective option wings at lower and higher strikes. Mark...

Iron Condor

An iron condor combines a defined risk put spread and a defined risk call spread with the same expiration. A common short iron condor is constructe...

Long Call Butterfly

A standard long call butterfly with evenly spaced strikes consists of: buying one lower strike call, selling two middle strike calls, and buying on...

Long Straddle

A long straddle involves buying: a call and a put with the same strike and expiration. Market view The trader expects sufficiently large movement b...

Long Strangle

A long strangle typically involves buying an OTM put and an OTM call with the same expiration. Market view The trader expects a sufficiently large...

Options Spread

An options spread combines two or more option positions on the same underlying, typically using different strikes, expirations or both.

Options Strategy

An options strategy is a position or combination of positions designed to create a particular exposure, payoff or risk profile. A strategy may cont...

Payoff Diagram

A payoff diagram visually represents how an options strategy's profit or loss changes across different underlying prices, usually at a specified po...

Poor Man's Covered Call

A Poor Man's Covered Call is a commonly used name for a diagonal call strategy that uses a longer dated long call alongside a shorter dated short c...

Protective Put

A protective put combines ownership of an underlying asset with a long put designed to limit downside below a specified level over the option's life.

Put Call Parity

Put call parity describes a pricing relationship between European style calls and puts with the same strike and expiration, the underlying asset an...

Ratio Spread

A ratio spread uses unequal numbers of long and short option contracts within the strategy.

Short Straddle

A short straddle involves selling a call and put with the same strike and expiration. Market view The trader generally expects movement and/or vola...

Short Strangle

A short strangle typically involves selling an OTM put and an OTM call with the same expiration. Market view The trader generally expects the under...

Straddle

A straddle combines a call and put with the same strike and expiration. It can be constructed either long or short.

Strangle

A strangle combines a call and put with different strike prices but the same expiration. It can be long or short.

Synthetic Long Stock

A standard synthetic long stock position can be constructed using: long call short put at the same strike and expiration. Under the relevant assump...

Synthetic Position

A synthetic position uses combinations of options and, in some cases, the underlying to create an economic exposure resembling another position.

Synthetic Short Stock

A standard synthetic short stock position can be constructed using: long put short call at the same strike and expiration. Its payoff resembles sho...

Undefined Risk

Undefined risk describes a position whose maximum potential loss is not capped at a predetermined amount by the option structure itself.

Vertical Spread

A vertical spread combines options of the same type and expiration but with different strike prices.