A bear call spread is a limited-risk-limited-reward strategy, consisting of one short call option and one long call option. This strategy generally profits if the stock price holds steady or declines.

It is one of the basic option strategies. The most it can generate is the net premium received at the outset. If the forecast is wrong and the stock rallies instead, the losses grow only until long call caps the amount. A bear put spread consists of buying one put and selling another put, at a lower strike, to offset part of the upfront cost. The spread generally profits if the stock price moves lower.

The potential profit is limited, but so is the risk should the stock unexpectedly rally. Bear Spread Spread This strategy is the combination of a bear put spread and a bear call spread.

A key part of the strategy is to initiate the position at even money, so the cost of the put spread should be offset by the proceeds from the call spread. This strategy consists of buying one call option and selling another at a higher strike price to help pay the cost.

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The spread generally profits if the stock price moves higher, just as a regular long call strategy would, up to the point where the short call caps further gains.

A bull put spread is a limited-risk-limited-reward strategy, consisting of a short put option and a long put option with a lower strike. This spread generally profits if the stock price holds steady or rises. This strategy is the combination of a bull call spread and a bull put spread.

A key part of the strategy is to initiate the position at even money, so the cost of the call spread should be offset by the proceeds from the put spread. This strategy allows an investor to purchase stock at the lower of strike price or market price during the life of the option.

The cash-secured put involves writing a put option and simultaneously setting aside the cash to buy the stock if assigned. If things go as hoped, it allows an investor to buy the stock at a price below its current market value. In that case, the investor simply keeps the interest on the T-Bill and the premium received for selling the put option. The investor adds a collar to an existing long stock position as a temporary, slightly less-than-complete hedge against the effects of a possible near-term decline.

The long put strike provides a minimum selling price for the stock, and the short call strike sets a maximum price. Covered Call This strategy consists of writing a call that is covered by an equivalent long stock position. This strategy is used to arbitrage a put that is overvalued because of its early-exercise feature. The investor simultaneously sells an in-the-money put at its intrinsic value and shorts the stock, and then invests the proceeds in an instrument earning the overnight interest rate.

When the option is exercised, the position liquidates at breakeven, but the investor keeps the interest earned. This strategy profits if the underlying stock moves up to, but not above, the strike price of the short calls. Beyond that, the profit is eroded and then hits a plateau. This strategy is appropriate for a stock considered to be fairly valued.

The investor has a long stock position and is willing to sell the stock if it goes higher or buy more of the stock if it goes lower. This strategy consists of buying a call option. If things go as planned, the investor will be able to sell the call at a profit at some point before expiration.

This strategy profits if the underlying stock is at the body of the butterfly at expiration. If the underlying stock remains steady or declines during the life of the near-term option, that option will expire worthless and leave the investor owning the longer-term option free and clear.

If both options have the same strike price, the strategy will always require paying a premium to initiate the position. This strategy profits if the underlying security is between the two short call strikes at expiration.

This strategy profits if the underlying stock is outside the outer wings at expiration. This strategy profits if the underlying stock is outside the wings of the iron butterfly at expiration. This strategy consists of buying puts as a means to profit if the stock price moves lower. It is a candidate for bearish investors who want to participate in an anticipated downturn, but without the risk and inconveniences of selling the stock short. The time horizon is limited to the life of the option.

If the stock remains steady or rises during the life of the near-term option, it will expire worthless and leave the investor owning the longer-term option. This strategy profits if the underlying security is between the two short put strikes at expiration. The initial cost to initiate this strategy is rather low, and may even earn a credit, but the upside potential is unlimited.

The basic concept is for the total delta of the two long calls to roughly equal the delta of the single short call. If the underlying stock only moves a little, the change in value of the option position will be limited. But if the stock rises enough to where the total delta of the two long calls approaches the strategy acts like a long stock position.

The initial cost to initiate this strategy is rather low, and may even earn a credit, but the downside potential is substantial. The basic concept is for the total delta of the two long puts to roughly equal the delta of the single short put. But if the stock declines enough to where the total delta of the two long puts approaches the strategy acts like a short stock position.

This strategy is simple.

It consists of acquiring stock in anticipation of rising prices. The gains, if there are any, are realized only when the asset is sold.

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Until that time, the investor faces the possibility of partial or total loss of the investment, should the telemarketing jobs from home in california lose value.

In some cases the stock may generate dividend income. In principle, this strategy imposes no fixed timeline. However, special circumstances could delay or accelerate an exit. For example, a margin purchase is subject to margin calls at any time, which could force a quick sale unexpectedly. This strategy consists of buying a call option and a put option with the same strike price and expiration. The combination generally profits if the stock price moves sharply in either direction during the life of the options.

This strategy profits if the stock price moves sharply in either direction during the life of the option. This strategy consists of writing an uncovered call option. It profits if the stock price holds steady or declines, and does best if the option expires worthless.

A naked put involves writing a put option without the reserved cash on hand to purchase the underlying stock. This strategy stock market diamonds a great deal of risk and relies on a steady or rising stock price. It does best if the option expires worthless. This strategy consists of adding a long put position to a long stock position. If the stock mytotalmoneymakeover.com rising, the investor benefits mabinogi fastest way to make money the upside gains.

Yet no matter how low the stock might fall, the investor can exercise the put to liquidate the stock at the strike price. This strategy profits if the underlying stock is outside the wings of the butterfly at expiration. This strategy profits from the different characteristics of near and longer-term call options. If the stock holds steady, the strategy suffers from time decay.

If the underlying stock moves sharply up or down, both options will move toward their intrinsic value or zero, thus narrowing the difference between their values. If both options have the same strike price, the strategy will always receive a premium when initiating the position. This strategy profits if the underlying stock is inside mini forex trading 101 inner wings at expiration.

This strategy profits if the underlying stock is inside the wings of the iron butterfly at expiration. This strategy profits from the different characteristics of near and longer-term put options.

If the underlying stock holds steady, the strategy suffers from time decay. If the stock moves sharply up work at home jobs cullman al down, both options will move toward their intrinsic value or zero, thus narrowing the difference between their values.

The strategy involves borrowing stock through the brokerage firm and selling the shares in the marketplace at the 24 hour binary option 4 aes price.

The goal is to buy them back later at a lower price, thereby locking in a profit. This strategy involves selling a call option and a put option with the same expiration and strike price.

It generally profits if the stock price and volatility remain steady. This strategy profits if the stock price and volatility remain steady during the life of the options.

This strategy can profit from a steady stock price, or from a falling implied volatility. The actual behavior of the strategy depends largely on the delta, theta and Vega of the combined position as well as whether a debit is paid or a credit received when initiating the position. This strategy can profit from a slightly falling stock price, or from a rising stock price. The actual behavior of the strategy depends largely on the delta, theta and vega of the combined position as well as whether a debit is paid or a credit received when initiating the position.

This strategy combines a long call and a short stock position. The strategy profits if the stock price moves lower—the more dramatically, the better. This strategy is essentially a long futures position on the underlying stock.

The long call and the short put combined simulate a long stock position. This strategy is offline data entry jobs from home without investment in ahmedabad a short futures position on the underlying stock.

Hedging Positions

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Please Enter Your Name Please Enter Correct Name. Please Enter Your Email ID Please Enter Correct Email ID. Please Enter Your Mobile Number Please Enter Correct Mobile Number. Can't read the image? Option Strategies to Mint Money. Bear Call Spread A bear call spread is a limited-risk-limited-reward strategy, consisting of one short call option and one long call option.

Bear Put Spread A bear put spread consists of buying one put and selling another put, at a lower strike, to offset part of the upfront cost. Bull Call Spread This strategy consists of buying one call option and selling another at a higher strike price to help pay the cost.

Bull Put Spread A bull put spread is a limited-risk-limited-reward strategy, consisting of a short put option and a long put option with a lower strike. Bull Spread Spread This strategy is the combination of a bull call spread and a bull put spread.

Cash-Backed Call This strategy allows an investor to purchase stock at the lower of strike price or market price during the life of the option. Cash-Secured Put The cash-secured put involves writing a put option and simultaneously setting aside the cash to buy the stock if assigned. Collar The investor adds a collar to an existing long stock position as a temporary, slightly less-than-complete hedge against the effects of a possible near-term decline. Covered Put This strategy is used to arbitrage a put that is overvalued because of its early-exercise feature.

Covered Ratio Spread This strategy profits if the underlying stock moves up to, but not above, the strike price of the short calls. Covered Strangle This strategy is appropriate for a stock considered to be fairly valued. Long Call This strategy consists of buying a call option. Long Call Butterfly This strategy profits if the underlying stock is at the body of the butterfly at expiration.

Long Call Condor This strategy profits if the underlying security is between the two short call strikes at expiration. Long Condor This strategy profits if the underlying stock is outside the outer wings at expiration.

Long Iron Butterfly This strategy profits if the underlying stock is outside the wings of the iron butterfly at expiration. Long Put This strategy consists of buying puts as a means to profit if the stock price moves lower.

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Long Put Butterfly This strategy profits if the underlying stock is at the body of the butterfly at expiration. Long Put Condor This strategy profits if the underlying security is between the two short put strikes at expiration.

Long Ratio Call Spread The initial cost to initiate this strategy is rather low, and may even earn a credit, but the upside potential is unlimited.

Long Ratio Put Spread The initial cost to initiate this strategy is rather low, and may even earn a credit, but the downside potential is substantial. Long Stock This strategy is simple.

Long Straddle This strategy consists of buying a call option and a put option with the same strike price and expiration.

Long Strangle This strategy profits if the stock price moves sharply in either direction during the life of the option. Naked Call This strategy consists of writing an uncovered call option. Naked Put A naked put involves writing a put option without the reserved cash on hand to purchase the underlying stock.

Protective Put This strategy consists of adding a long put position to a long stock position. Short Call Butterfly This strategy profits if the underlying stock is outside the wings of the butterfly at expiration. Short Call Calendar Spread This strategy profits from the different characteristics of near and longer-term call options. Short Condor This strategy profits if the underlying stock is inside the inner wings at expiration.

Short Iron Butterfly This strategy profits if the underlying stock is inside the wings of the iron butterfly at expiration. Short Put Butterfly This strategy profits if the underlying stock is outside the wings of the butterfly at expiration.

Short Put Calendar Spread This strategy profits from the different characteristics of near and longer-term put options. Short Straddle This strategy involves selling a call option and a put option with the same expiration and strike price. Short Strangle This strategy profits if the stock price and volatility remain steady during the life of the options.

Short Ratio Call Spread This strategy can profit from a steady stock price, or from a falling implied volatility. Short Ratio Put Spread This strategy can profit from a slightly falling stock price, or from a rising stock price. Synthetic Long Put This strategy combines a long call and a short stock position. Synthetic Long Stock This strategy is essentially a long futures position on the underlying stock. Synthetic Short Stock This strategy is essentially a short futures position on the underlying stock.

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