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Basic Call/Put Option: An option is a form of leverage allowing the buyer the opportunity to buy or sell a stock at a set price sometime in the future. For this right the option buyer pays a premium. More on this... Bear Call Spread: A bear call spread is a form of a credit spread where you are selling time and waiting for time to expire so that you can benefit from the time decay. It is much the same as a bull put spread with the exception that you are betting that the stock will go sideways or down instead of up. More on this... Bear Put Spread: A bearish strategy in which you sell an out of the money put and buy an at the money put. Your profits come as the stock drops and can be profitable even if there are no moves in the stock. More on this... Bull Call Spread: A bull call spread is an option strategy in which a call is purchased and a higher strike price call is sold. This is used when you are bullish on a stock. It is much the same as writing a covered call without buying the stock. More on this... Bull Put Spread: A bull put spread is an option strategy in which an out of the money put is sold and an even further out of the money put purchased as insurance. This strategy is used with a neutral to bullish outlook on a stock. More on this... Butterfly Call Options: This is an option strategy in which one contract in each of two outside strikes are purchased and two contracts on the middle strike are sold. It sounds confusing but it is really rather simple. More on this... Butterfly Put Options: This is an option strategy in which one contract in each of two outside strikes are purchased and two contracts on the middle strike are sold. It sounds confusing but it is really rather simple. More on this... Calendar Spreads: These are much the same as writing a covered call but you are able to buy an option instead of the stock. More on this... Calls: The most widely used option trade is a simple call option. A call option gives the buyer the right, but not the obligation, to purchase a stock. It is used as a bullish strategy. More on this... Collars: A collar is an option strategy in which stock is purchased, an out-of-the-money call is sold, and an out-of-the-money put is purchased. This strategy can have varying degrees of bullishness depending which call strike is sold. More on this... Conversions: An extremely short strategy where profits are locked in immediately by taking advantage of options prices in different markets. More on this... Covered Call: A stock/option strategy in which stock is purchased and a call option is sold against the stock you now own. This is a low risk/low profit strategy. More on this... Index Options: Index options are way to let investors hedge or speculate on a broad market index. The main difference between Index options and equity (stock) options is that Index options are settled on a cash basis. More on this... Leaps: A LEAPS often referred to, as a Leap is an acronym for a Long Term Anticipation Security. It is typical in every way to a conventional option except that it has an expiration date of January up to 2 1/2 years out. More on this... Long Strangle: A long strangle is an option strategy in which an out-of-the-money call and an out-of-the-money put of the same month and stock are purchased. This position is called a "strangle" since it suffers a more rapid rate of time decay than a single long option. More on this... Long Straddles: A long straddle is an option strategy in which a call and a put of the same strike, month and underlying terms are purchased. This position is called a straddle since it will profit from a substantial change in the stock price in either direction. More on this... Protective Put: This is a bullish strategy with a hedge to the downside. You start the trade by purchasing a stock and then protect yourself with a long term put. More on this... Put Option: A put option is a simple option trade that allows the put buyer to profit on a stock if it drops in value. It is a bearish trade and one of the most common option strategies. More on this... Put Back Spread: A
put back spread is a bearish strategy in which you try to pay yourself for doing
a trade with a large downside reward. In this type of trade you start off by
selling 1 strike price and then buying two more at a lower strike. More
on this... Short Straddles: A short straddle is an option strategy in which an at the money call and an at the money put are sold. It is used to profit on a stock when little movement is expected in either direction. Short Strangle: A short strangle is an option strategy in which an out-of-the-money call and an out-of-the-money put of the same month and stock are sold. This position is called a "strangle" since it suffers a more rapid rate of time decay than a single short option. More on this... Selling Puts: Selling puts is like covered calls in reverse. Although you are still betting that your stock will go up or stay the same. Your risk is that the stock will go down. More on this... Time Diagonal Spread: A time diagonal spread can be written many ways. Spread meaning you are dealing two different strike prices and time diagonal meaning these two strike prices are in different expiration months. These are a bit more conservative. than regular call and put spreads. More on this... Expiring Options: Options expiration Friday can be a scary time for many new traders. Questions always arise about what to do with a certain option and what will happen if I don’t do anything before the close on expiration Friday. More on this... Selling Your Option: At some point in you trade you will need to make the decision to sell or exit the trade. Knowing when you trade is about to change direction will help you optimize your profits. More on this... Future Articles Covered Put: Back Spread: Delta-Hedged Iron Butterfly: Ratio Back Spread: Ratio Call Spread: Ratio Put Spread: Synthetic Long Call: Synthetic Long Put: Synthetic Long Stock: Synthetic Short Call: Synthetic Short Put: Synthetic Short Stock: Synthetic Underlying: Vertical Spreads: |