Common options strategies such as covered calls, spreads, and straddles, distinct from the Series 7 regulatory options deck.
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- What is a covered call?
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Selling a call option against shares you own, capping upside but generating income.- A covered call is best for what market outlook?
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Mildly bullish or neutral, when you expect little price movement.- What is the maximum profit from a covered call?
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The difference between your cost basis and the call strike price, plus the premium received.- What is the main disadvantage of a covered call?
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Profit is capped if the stock rises well above the strike price.- What is a protective put?
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Buying a put option against shares you own to limit downside losses.- A protective put is best for what market outlook?
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Bullish, when you want downside protection.- What is the main cost of a protective put?
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The put premium reduces net profit if the stock price rises.- What is a call spread?
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Simultaneously buying and selling call options at different strike prices.- What is a bull call spread?
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Buying a lower-strike call and selling a higher-strike call with the same expiration.- A bull call spread is best for what market outlook?
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Mildly to moderately bullish outlook.- What is the maximum profit of a bull call spread?
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The difference between strike prices, minus the net premium paid.- What is a bear call spread?
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Selling a lower-strike call and buying a higher-strike call with the same expiration.- A bear call spread is best for what market outlook?
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Bearish, when you expect the stock price to decline.- What is a put spread?
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Simultaneously buying and selling put options at different strike prices.- What is a bull put spread?
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Selling a higher-strike put and buying a lower-strike put with the same expiration.
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