Options Strategies
Reference guides to the standard options strategies, grouped by market outlook — bullish plays like covered calls and bull call spreads, bearish plays like long puts and bear put spreads, and neutral or volatility trades like straddles, strangles, condors, and butterflies. Each covers construction, payoff, breakeven, and the risks that matter.
- Bear Call Spread
A bear call spread sells a lower-strike call and buys a higher-strike call for a net credit, profiting if the stock stays below the short strike.
- Bear Put Spread
A bear put spread buys a higher-strike put and sells a lower-strike put for a net debit, capping both the cost and the profit on a bearish trade.
- Bull Call Spread
A bull call spread buys a lower-strike call and sells a higher-strike call, lowering cost while capping both the maximum profit and the loss.
- Bull Put Spread
A bull put spread sells a higher-strike put and buys a lower-strike put for a net credit, profiting if the stock holds above the short strike.
- Butterfly
The long call butterfly bets on a stock pinning near one strike, capping both profit and loss for a small net debit paid at entry.
- Calendar Spread
A calendar spread sells a near-term option and buys a longer-dated option at the same strike, profiting when the stock sits near the strike as time passes.
- Call Back Spread
A call back spread sells one lower-strike call and buys two higher-strike calls, aiming to profit from a large rally with a defined worst case.
- Call Options
A long call gives the right to buy shares at a fixed strike price; loss is capped at the premium paid while upside stays theoretically unlimited.
- Collar
A collar hedges 100 owned shares by buying a protective put and selling a covered call, capping both downside loss and upside gain.
- Condor
The iron condor sells a call spread and a put spread for a net credit, profiting in a wide zone between the two short strikes with defined risk.
- Conversion
A conversion locks in a small, near risk-free arbitrage profit from put-call parity mispricing; costs and spreads make it impractical for retail traders.
- Covered Call
A covered call sells one call against 100 owned shares for premium income, capping the upside at the strike while downside risk stays large.
- Long Put
A long put gives the buyer the right to sell 100 shares at a fixed strike price, profiting from a decline while risking only the premium paid.
- Long Straddle
Buy a call and a put at the same strike and expiry to profit from a big move in either direction; loses to time decay if the stock sits still.
- Long Strangle
Buy an out-of-the-money call and put at different strikes for a cheaper bet on a big move than a straddle, at the cost of needing a wider swing.
- Naked Call
A naked call sells a call option without owning the stock, collecting premium up front while exposing the seller to theoretically unlimited loss.
- Naked Put
Selling a naked put collects premium now in exchange for a large obligation to buy 100 shares at the strike if the stock falls before expiration.
- Protective Put
A protective put pairs owned shares with a purchased put, capping downside at a known floor while upside stays open above the premium cost.
- Put Back Spread
A put back spread sells one higher-strike put and buys two lower-strike puts, aiming for a large payoff if the stock falls sharply and quickly.
- Put Ratio Spread
A put ratio spread buys one put and sells two lower-strike puts, collecting a credit but carrying a large naked short-put risk below the lower strike.
- Reversal
A reversal (reverse conversion) locks in a small arbitrage profit from an overpriced put using short stock, a short put, and a long call.
- Short Straddle
Selling a call and a put at the same strike collects premium if the stock sits still, but carries unlimited upside risk and very large downside risk.
- Short Strangle
Selling an out-of-the-money call and put collects premium if the stock stays in a range, but carries unlimited upside risk and very large downside risk.