Option Strategies The fundamental of Listed Options What options are What makes up an Option The...

Post on 29-Jan-2016

221 views 4 download

Tags:

Transcript of Option Strategies The fundamental of Listed Options What options are What makes up an Option The...

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