Category: Option Strategies
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PUT OPTIONS
The simple textbook definition is a buyer of a Put option has the right (but not the obligation) to sell a specified quantity of a security at a specified price (strike price) within a fixed period of time (expiration date). Outright Put buying has almost unlimited upside with limited downside. Securities mostly don’t go below […]
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CALL OPTIONS
The simple textbook definition is a buyer of a Call option has the right (but not the obligation) to buy a specified quantity of a security at a specified price (strike price) within a fixed period of time (expiration date). In theory, outright call buying has unlimited upside with limited downside. I say “unlimited in […]
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Short combination/ Risk Reversal/ Combo (same strike)
Buying the put gives you the right to sell the stock at strike price A. Selling the call obligates you to sell the stock at strike price A if the option is assigned. This strategy is often referred to as “synthetic short stock” because the risk / reward profile is nearly identical to short stock. […]
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Long combination/ Risk Reversal/ Combo (same strike)
Buying the call gives you the right to buy the stock at strike price A. Selling the put obligates you to buy the stock at strike price A if the option is assigned. This strategy is often referred to as “synthetic long stock” because the risk / reward profile is nearly identical to long stock. […]
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Short Straddle
A short straddle gives you the obligation to sell the stock at strike price A and the obligation to buy the stock at strike price A if the options are assigned. By selling two options, you significantly increase the income you would have achieved from selling a put or a call alone. But that comes […]