[OPTIONS] TRADING STRATEGIES
I. A single option & a stock
(a) Short call + Long stock (Covered call)
(b) Long call + Short stock
(c) Long put + Long stock (Protective put)
(d) Short put + Short stock
Range
St <= K
St > K
Range
St <= K
St > K
Range
St <= K
St > K
Range
St <= K
St > K
Total profit
St - So + C
K - So + C
Total profit
- St + So - C
- K + So - C
Total profit
K - So - P
St - So - P
Total profit
- K + So + P
- St + So + P
Breakeven point(s)
St = So - C
Breakeven point(s)
St = So - C
Breakeven point(s)
St = So + P
Breakeven point(s)
St = So + P
II. Spreads (taking a position in 2 or more options of the same types)
Bull Spreads - future stock price is expected to increase
Course 1: Long call (K1), short call (K2), K2 > K1
Bear Spreads - future stock price is expected to decrease
Course 2: Long put (K1), short put (K2), K2 > K1
Course 1: Long put (K2), short put (K1), K1 < K2
Range
St < K1
K1 <= St <= K2
St > K2
Range
St < K1
K1 <= St <= K2
St > K2
Range
Total profit
- C1 + C2
St - K1 - C1 +
C2
- K1 + K2 - C1
+ C2
Total profit
K1 - K2 - P1 +
P2
St - K2 - P1 +
P2
- P1 + P2
Total profit
Breakeven
point(s)
Breakeven
point(s)
St = K1 + C1 - C2
St < K1
St > K2
Range
St < K1
K1 <= St <= K2
St > K2
- K1 + K2 + P1 - - St + K2 + P1 P2
P2
P1 - P2
Total profit
C1 - C2
- St + K1 + C1 C2
K1 - K2 + C1 C2
Breakeven
point(s)
St = K2 + P1 - P2
Course 2: Long call (K2), short call (K1), K1 < K2
K1 <= St <= K2
Breakeven point
(s)
St = K2 + P1 - P2
St = K1 + C1 - C2
Long K lớn
Short K lớn
Butterfly Spreads - future stock price is expected not to fluctuate much
Course 1: Long call (K1), long call (K3), short 2 calls [K2 = (K1 + K3)/2],
K1 < K2 < K3
Range
Total profit
Breakeven
point(s)
St < K1
K1 <= St <= K2 K2 <= St <= K3
2C2 - C1 - C3
- K1 + St + 2C2
- C1 - C3
St = K1 - 2C2 + C1 + C3
K3 - St + 2C2 C1 - C3
St > K3
2C2 - C1 - C3
St = K3 + 2C2 - C1 - C3
Course 2: Long put (K1), long put (K3), short 2 puts [K2 = (K1 + K3)/2],
K1 < K2 < K3
Range
Total profit
St < K1
K1 <= St <= K2
K2 <= St <= K3
St > K3
2P2 - P1 - P3
- K1 + St + 2P2
- P1 - P3
K3 - St + 2P2 P1 - P3
2P2 - P1 - P3
Breakeven
point(s)
St = K1 - 2P2 + P1 + P3
St = K3 + 2P2 - P1 - P3
III. Combinations (taking a position in both calls and puts on the same stock)
Straddles: Long call, long put (same K) future stock price is believed to fall/rise dramatically
Range
St <= K
St > K
Strips: Long call, long 2 puts (same K) future stock price is believed to fall more dramatically
Range
St <= K
- 2St + 2K - C 2P
Total profit
- St + K - C - P
St - K - C - P
Total profit
Breakeven point(s)
St = K - C - P
St = K + C + P
Breakeven point(s)
St > K
St - K - C - 2P
St = K - C/2 - P St = K + C + 2P
Straps: Long 2 calls, long put (same K) future stock price is believed to rise more dramatically
Range
St <= K
St > K
Total profit
- St + K - 2C - P
2St - 2K - 2C - P
Breakeven point(s)
St = K - 2C - P
St = K + C + P/2
Strangles: Long put (K1), long call (K2), K2 > K1
Range
St < K1
K1 <= St <= K2
St > K2
Total profit
- St + K1 - C P
-C-P
St - K2 - C - P
Breakeven point
St = K1 - C - P
(s)
St = K2 + C + P