Strategy Library
Seventeen option strategies, each broken down the way a desk thinks about it — the market view, when it works, your real max profit and loss, the net Greeks, and the mistakes that quietly kill the trade. Start with the plain-English gist, then dig into the detail.
Covered Call
You own the stock and rent it out. You sell someone the right to buy it from you at a higher price, pocketing a small fee now. If it stays flat or rises gently, you keep the fee. If it rockets past the price, you miss the extra upside.
Protective Put
Insurance for a position you own. You pay a small premium for a put that pays out if the price crashes — like paying for car insurance so a big accident does not wipe you out. You keep all the upside, minus the insurance cost.
Bull Call Spread
A cheaper way to bet on a rise. You buy a call, then sell a higher call to fund part of it. You give up the gains above that higher strike in exchange for paying less and knowing your exact max loss up front.
Bear Put Spread
The mirror of a bull call spread, for a fall. You buy a put and sell a lower put to cut the cost. You profit if the price drops to your target, with a known maximum loss.
Bull Put Spread (Credit)
Get paid now for betting a price will NOT fall much. You sell a put and buy a lower one for protection. You keep the cash if the price stays up; your loss is capped if it falls.
Bear Call Spread (Credit)
Get paid now for betting a price will NOT rise much. You sell a call and buy a higher one as a safety net. You keep the cash if the price stays down; the loss is capped if it rises.
Long Straddle
A bet that something big happens — you do not care which way. You buy both a call and a put at the same strike. A large move either direction pays off; the danger is the price sitting still and both options decaying.
Short Straddle
The opposite of a long straddle — you bet nothing much happens. You sell both a call and a put and collect rich premium. You win if the price stays pinned, but a big surprise move can hurt badly. Experts only.
Long Strangle
A cheaper long straddle. You buy an out-of-the-money call and put, so it costs less — but the price has to move further before you profit. A bet on a really big move.
Short Strangle
Like a short straddle but with a wider safe zone. You sell an OTM call and put, giving the price more room to wander before you lose. Still has open-ended risk on a big move.
Iron Condor
The workhorse income trade. You sell a put spread below and a call spread above, getting paid if the price stays in a band. Both sides are protected, so your loss is capped — the safer cousin of a short strangle.
Iron Butterfly
A tighter, higher-paying iron condor. You sell at-the-money instead of out-of-the-money, so you collect more premium but the profit zone is narrower — you really need the price to pin one level.
Calendar Spread
A bet on time, not direction. You sell a near-expiry option and buy a far-expiry one at the same strike. The near one decays faster, so you profit from that difference if the price sits still.
Diagonal Spread
A calendar spread with a directional tilt — different strikes AND different expiries. You blend a mild directional bet with a time-decay tailwind. Often run as a "poor man's covered call".
Call Ratio Spread
You buy one call and sell two higher ones, often for a credit. You profit if the price drifts up to the short strikes — but selling an extra naked call means open-ended risk if it runs too far.
Long Call Butterfly
A cheap, precise bet that the price lands on a specific level. You buy one lower call, sell two in the middle, and buy one higher. It costs little and pays well if the price pins the middle strike at expiry.
Synthetic Long
Mimic owning a future using two options. You buy a call and sell a put at the same strike, which behaves almost exactly like a long futures position — sometimes cheaper. Just remember the downside is futures-like, NOT capped.