
LONG CALL | bull strategy
Example: Buy call
Market Outlook: Bullish
Risk: Limited
Reward: Unlimited
Increase in Volatility: Helps position
Time Erosion: Hurts position
Break-Even Point (BEP): Strike price plus premium paid
Too often, traders jump into the options game with little or no understanding of how many options strategies are available to limit their risk and maximize return. With a little bit of effort, however, traders can learn how to take advantage of the flexibility and full power of options as a trading vehicle. With this in mind, we've put together this basic directions and neutral option strategies, which we hope will point you in the right direction.
Example: Buy call
Market Outlook: Bullish
Risk: Limited
Reward: Unlimited
Increase in Volatility: Helps position
Time Erosion: Hurts position
Break-Even Point (BEP): Strike price plus premium paid
Example: Buy futures; buy put
Market Outlook: Carefully bullish
Risk: Limited
Reward: Unlimited
Increase in Volatility: Helps position
Time Erosion: Hurts position
Break-Even Point (BEP): Starting futures price plus premium paid
Example: Buy futures; sell calls
Market Outlook: Neutral to slightly bullish
Risk: Limited, but substantial (risk is from a fall in futures price)
Reward: Limited
Increase in Volatility: Hurts position
Time Erosion: Helps position
Break-Even Point (BEP): Starting futures price minus premium received
Example: Sell put
Market Outlook: Neutral to slightly bullish
Risk: Limited, but substantial
Reward: Limited
Increase in Volatility: Hurts position
Time Erosion: Helps position
Break-Even Point (BEP): Minimum strike price minus premium received
Example: Buy 1 call; sell 1 call at higher strike
Market Outlook: Bullish
Risk: Limited
Reward: Limited
Increase in Volatility: Helps or hurts depending on strikes chosen
Time Erosion: Helps or hurts depending on strikes chosen
Break-Even Point (BEP): Long call strike plus net premium paid
Example: Sell 1 put; buy 1 put at lower strike with same expiry
Market Outlook: Neutral to bullish
Risk: Limited
Reward: Limited
Increase in Volatility: Typically hurts position slightly
Time Erosion: Helps position
Break-Even Point (BEP): Short put strike minus credit received
Example: Buy put
Market Outlook: Bearish
Risk: Limited
Reward: Limited, but substantial
Increase in Volatility: Helps position
Time Erosion: Hurts position
Break-Even Point (BEP): Strike price minus premium paid
Example: Buy call; sell put
Market Outlook: Bullish
Risk: Unlimited
Reward: Unlimited
Increase in Volatility: Does not affect the position strongly
Time Erosion: Does not affect the position strongly
Break-Even Point (BEP): Strike Price of Long Call + Net Premium Paid
Example: Sell put; sell futures
Market Outlook: Bearish
Risk: Unlimited
Reward: Limited
Increase in Volatility: Hurts position
Time Erosion: Helps position
Break-Even Point (BEP): Sale Price of Underlying + Premium Received
Example: Sell call
Market Outlook: Bearish
Risk: Unlimited
Reward: Limited
Increase in Volatility: Hurts position
Time Erosion: Helps position
Break-Even Point (BEP): Strike Price of Short Call + Premium Received
Example: Sell 1 put; buy 1 put at higher strike
Market Outlook: Bearish
Risk: Limited
Reward: Limited
Increase in Volatility: Helps or hurts depending on strikes chosen
Time Erosion: Helps or hurts depending on strikes chosen
Break-Even Point (BEP): Long put strike minus net premium paid
Example: Sell 1 call; buy 1 call at higher strike
Market Outlook: Neutral to bearish
Risk: Limited
Reward: Limited
Increase in Volatility: Typically hurts position slightly
Time Erosion: Helps position
Break-Even Point (BEP): Short call strike plus credit received
Example: Sell 1 call; buy 1 put
Market Outlook: Bearish
Risk: Unlimited
Reward: Unlimited
Increase in Volatility: Does not affect the position strongly
Time Erosion: Does not affect the position strongly
Break-Even Point (BEP): Strike Price of Long Put + Net Premium Received
Example: Sell 1 call; sell 1 put at same strike
Market Outlook: Neutral
Risk: Unlimited
Reward: Limited
Increase in Volatility: Hurts position
Time Erosion: Helps position
Break-Even Point (BEP): Two BEPs 1. Call strike plus premium received 2. Put strike minus premium received
Example: Buy call; sell futures
Market Outlook: Bearish
Risk: Limited
Reward: Unlimited
Increase in Volatility: Helps position
Time Erosion: Hurts position
Break-Even Point (BEP): Sale Price of Underlying - Premium Paid
Example: Sell 1 call with higher strike; sell 1 put with lower strike
Market Outlook: Neutral
Risk: Unlimited
Reward: Limited
Increase in Volatility: Hurts position
Time Erosion: Helps position
Break-Even Point (BEP): Two BEPs 1. Call strike plus premium received 2. Put strike minus premium received
Example: Sell put; buy put (Lower Strike); sell call; buy call (Higher Strike)
Market Outlook: Neutral
Risk: Limited
Reward: Limited
Increase in Volatility: Hurts position
Time Erosion: Helps position
Break-Even Point (BEP): Two BEPs 1. Strike Price of Short Call + Net Premium Received 2. P Strike Price of Short Put - Net Premium Received
Example: Sell 2 calls; buy 1 call at next lower strike; buy 1 call at next higher strike (the strikes are equidistant)
Market Outlook: Neutral around strike
Risk: Limited
Reward: Limited
Increase in Volatility: Typically hurts position
Time Erosion: Typically helps position
Break-Even Point (BEP): Two BEPs 1. Lower long call strike plus net premium paid 2. Higher long call strike minus net premium paid