A study on call_and_put_options

Jun 28th, 2015
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A. T. Still University
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long Put Action: Buying a Put option Expectation: Stock/Market will be Bearish Profit: Unlimited on stock price/market falling Loss: Limited to amount invested into position (premium) Breakeven: Strike price – premium

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Infinanceanoption strategyis the purchase and/or sale of one or variousoptionpositions and possibly anunderlyingposition.Options strategies can favor movements in the underlying that are bullish, bearish or neutral. In the case of neutral strategies, they can be further classified into those that are bullish on volatility and those that are bearish on volatility. The option positions used can belongand/orshortpositions incallsand/orputsat variousstrikes.Bullish strategiesBullish options strategies are employed when the options trader expects the underlying stock price to move upwards. It is necessary to assess how high the stock price can go and the time frame in which the rally will occur in order to select the optimumtrading strategy.The most bullish of options trading strategies is the simple call buying strategy used by most novice options traders.Stocks seldom go up by leaps and bounds. Moderately bullish options traders usually set a target price for the bull run and utilize bull spreads to reduce cost. (It does not reduce risk because the options can still expire worthless.) While maximum profit is capped for these strategies, they usually cost less to employ for a given nominal amount of exposure. Thebull call spreadand thebull put spreadare common examples of moderately bullish strategies.Mildly bullish trading strategies are options strategies that make money as long as the underlying stock price does not go down

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