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