The

”ULTIMATE” Options Strategy Guide

About Us. . .Option Alpha has been an industry leader in options trading education for 7 years.!

With more than 60,000+ subscribers, followers, fans, and and traders in our community we are on a mission to helping every single person we meet.!

So, whether you’re looking to use options for hedging and protection or speculation and income, you’ll need to know more about how to use them correctly (meaning that you should actually make a profit).!

That’s where we come into play!

Using This Guide

Each strategy has an accompanying graph showing profit and loss at expiration. The vertical axis shows the profit/loss scale.!!When the strategy line is below the horizontal axis, it assumes you paid for the position or had a loss. When it is above the horizontal axis, it assumes you received a credit for the position or a profit.!!The dotted line indicates the strike price. The intersection of the strategy line and the horizontal axis is the break-even point (BEP) not including transaction costs, commissions, or margin(borrowing) costs.!!The risks/rewards described are generalizations and may be lesser or greater than indicated.

Bullish!Options!

Strategies

Put Credit Spread

Example: Sell 1 put; buy 1 put at lower strike!

Risk: Limited!

Reward: Limited!

Increase in Volatility: Helps or hurts depending on strikes chosen!

Time Erosion: Helps or hurts depending on strikes chosen!

BEP: Short put strike minus net credit

Naked Short Put

Example: Sell 1 put!

Risk: Unlimited!

Reward: Limited!

Increase in Volatility: Hurts position!

Time Erosion: Helps position!

BEP: Strike price minus credit received

Call Butterfly

Example: Buy 1 call; sell 2 calls at next higher strike; buy 1 call at next higher strike (can skip strike for BWB)!

Risk: Limited!

Reward: Limited!

Increase in Volatility: Typically hurts position!

Time Erosion: Typically helps position!

BEP: Two BEPs!

1. Lower long call strike plus net debit paid!

2. Higher long call strike minus net debit paid

Call Debit Spread

Example: Buy 1 call; sell 1 call at higher strike!

Risk: Limited!

Reward: Limited!

Increase in Volatility: Helps or hurts depending on strikes chosen!

Time Erosion: Helps or hurts depending on strikes chosen!

BEP: Long call strike plus net premium paid

Call Calendar

Example: Sell 1 near-term call; buy 1 long-term call same strike!

Risk: Limited!

Reward: Limited!

Increase in Volatility: Helps position!

Time Erosion: Typically helps position!

BEP: Varies depending on strikes

Call Back-Spread

Example: Sell 1 call; buy 2 calls at higher strike!

Risk: Limited!

Reward: Unlimited!

Increase in Volatility: Typically helps position!

Time Erosion: Typically hurts position!

BEP: Two BEPs!

1. Short call strike plus net credit received!

2. Long call strike plus [(the difference between the long call strike and short call strike) minus credit received]

Neutral!Options!

Strategies

Short Strangle

Example: Sell 1 call; sell 1 put at strikes equal from current price!

Risk: Unlimited!

Reward: Limited!

Increase in Volatility: Hurts position!

Time Erosion: Helps position!

BEP: Two BEPs!

1. Call strike plus net credit received!

2. Put strike minus net credit received

Long Strangle

Example: Buy 1 call; buy 1 put at strikes equal from current price!

Risk: Limited!

Reward: Unlimited!

Increase in Volatility: Helps position!

Time Erosion: Hurts position!

BEP: Two BEPs!

1. Call strike plus net debit paid!

2. Put strike minus net debit paid

Iron Condor

Example: Sell 1 call; buy 1 call at higher strike; sell 1 put; buy 1 put at lower strike!

Risk: Limited!

Reward: Limited!

Increase in Volatility: Helps or hurts depending on strikes chosen!

Time Erosion: Helps or hurts depending on strikes chosen!

BEP: Two BEPs!

1. Short call strike minus net credit received!

2. Short put strike plus net credit received

Short Straddle

Example: Sell 1 call; sell 1 put at same strike!

Risk: Unlimited!

Reward: Limited!

Increase in Volatility: Hurts position!

Time Erosion: Helps position!

BEP: Two BEPs!

1. Call strike plus net credit received!

2. Put strike minus net credit received

Long Straddle

Example: Buy 1 call; buy 1 put at same strike price!

Risk: Limited!

Reward: Unlimited!

Increase in Volatility: Helps position!

Time Erosion: Hurts position!

BEP: Two BEPs!

1. Call strike plus net debit paid!

2. Put strike minus net debit paid

Bearish!Options!

Strategies

Call Credit Spread

Example: Sell 1 call; buy 1 call at higher strike!

Risk: Limited!

Reward: Limited!

Increase in Volatility: Helps or hurts depending on strikes chosen!

Time Erosion: Helps or hurts depending on strikes chosen!

BEP: Short call strike plus net credit

Naked Short Call

Example: Sell 1 call!

Risk: Unlimited!

Reward: Limited!

Increase in Volatility: Hurts position!

Time Erosion: Helps position!

BEP: Strike price plus credit received

Put Butterfly

Example: Buy 1 put; sell 2 puts at next lower strike; buy 1 put at next lower strike (can skip strike for BWB)!

Risk: Limited!

Reward: Limited!

Increase in Volatility: Typically hurts position!

Time Erosion: Typically helps position!

BEP: Two BEPs!

1. Higher long put strike minus net debit paid!

2. Lower long put strike plus net debit paid

Put Debit Spread

Example: Buy 1 put; sell 1 put at lower strike!

Risk: Limited!

Reward: Limited!

Increase in Volatility: Helps or hurts depending on strikes chosen!

Time Erosion: Helps or hurts depending on strikes chosen!

BEP: Long put strike minus net premium paid

Put Calendar

Example: Sell 1 near-term put; buy 1 long-term put same strike!

Risk: Limited!

Reward: Limited!

Increase in Volatility: Helps position!

Time Erosion: Typically helps position!

BEP: Varies depending on strikes

Put Back-Spread

Example: Sell 1 put; buy 2 puts at lower strike!

Risk: Limited!

Reward: Limited, but substantial!

Increase in Volatility: Typically helps position!

Time Erosion: Typically hurts position!

BEP: Two BEPs!

1. Short put strike minus premium received!

2. Long put strike minus [(difference between long put strike and short put strike) minus credit received]