Lesson 17: Option Strategies

Question 1

Define a “floor”

Answer 1

Sets a bottom limit for the price you get selling the stock. An example would be a put in the presence of the underlying stock.

Question 2

Define a “cap”

Answer 2

A cap limits the price for buying a stock. A call in the presence of the underlying short stock is an example.

Question 3

Define naked writing

Answer 3

Writing, or selling, an option with no protection.

Question 4

Define a covered written call

Answer 4

When one writes a call and owns the underlying asset

Question 5

Define a covered written put

Answer 5

When one writes a put option and sells the underlying asset short.