OptionsStrategies Flashcards
What is a Long Call strategy?
Buy a call option to profit from a stock price increase. Limited risk (premium paid), unlimited reward.
What is a Long Put strategy?
Buy a put option to profit from a stock price decrease. Limited risk (premium paid), unlimited reward.
What is a Covered Call strategy?
Own the stock and sell a call option. Generates income (premium), but limits potential upside if stock rises above strike price.
What is a Protective Put strategy?
Own the stock and buy a put option as insurance. Protects against significant downside risk while allowing upside potential.
What is a Straddle strategy?
Buy both a call and put option at the same strike price and expiration. Profits from large price movements in either direction.
What is a Strangle strategy?
Buy a call and put option with different strike prices but same expiration. Profits from large price movements, but cheaper than a straddle.
What is an Iron Condor strategy?
Sell an out-of-the-money call and put, while buying further out-of-the-money options to limit risk. Profits from a stock staying within a range.
What is an Iron Butterfly strategy?
Combine a short straddle with long wings (call and put options). Profits when stock stays at the strike price of the short options.
What is a Butterfly Spread strategy?
Buy one in-the-money call, sell two at-the-money calls, and buy one out-of-the-money call. Profits from low volatility and stock price staying near the middle strike price.
What is a Calendar Spread strategy?
Buy a longer-term option and sell a shorter-term option with the same strike price. Profits from time decay and volatility differences between expirations.
What is a Diagonal Spread strategy?
A mix of a calendar spread and a vertical spread. Buy a longer-term option at one strike price, sell a shorter-term option at a different strike price.
What is a Ratio Call Write strategy?
Own the stock and sell more call options than the number of shares you own. Generates income but has unlimited risk if stock price rises sharply.
What is a Vega Neutral strategy?
A strategy designed to minimize the impact of volatility on options, often using combinations of long and short options to hedge volatility risk.
What is a Volatility Straddle strategy?
Buy both a call and a put option on the same underlying asset to profit from large price movements when expecting high volatility.
