Options Strategies

Options strategy combining a protective put (downside protection) with a covered call (upside limitation) on stock you already own. Typically structured to be zero-cost or low-cost, where the premium received from selling the call offsets the cost of buying the put. Caps both potential gains (above call strike) and potential losses (below put strike), creating a defined profit/loss range. Commonly used by investors with concentrated stock positions (executives, founders) who want to protect gains without triggering immediate capital gains taxes.

Example: Sarah, a tech executive, owns 10,000 shares of her company stock trading at $100 per share (total va...

An options strategy where an investor owns 100 shares of stock and sells (writes) one call option against those shares to generate income from the premium received. The stock ownership "covers" the obligation to deliver shares if the call is exercised. This strategy produces premium income but caps upside potential at the strike price plus premium. Suitable for investors seeking income enhancement on existing stock positions with neutral to moderately bullish outlook.

Example: An investor owns 500 shares of XYZ stock currently trading at $50. To generate income, they sell 5 c...

An options strategy involving the simultaneous purchase of a call option and a put option on the same underlying security, with identical strike prices and expiration dates. This strategy profits from significant price movement in either direction and is used when an investor expects high volatility but is uncertain about the direction. Maximum loss is limited to the total premiums paid for both options. Breakeven points occur at the strike price plus total premiums (upside) and strike price minus total premiums (downside). Suitable for sophisticated investors anticipating major price volatility, such as before earnings announcements or regulatory decisions.

Example: An investor expects significant movement in XYZ stock (currently at $50) surrounding an upcoming ear...

An options strategy involving the simultaneous purchase of an out-of-the-money call and an out-of-the-money put on the same underlying security with the same expiration date but different strike prices. Costs less than a long straddle because both options are out-of-the-money, but requires a larger price movement in either direction to be profitable. Maximum loss is limited to the total premiums paid for both options. Used when expecting significant volatility but uncertain of direction.

Example: An investor expects XYZ stock (currently at $50) to make a large move before earnings but is unsure ...

An options strategy combining long stock ownership with purchasing put options on the same stock, creating downside protection. The put gives the owner the right to sell shares at the strike price, establishing a price floor. The premium paid for the put reduces overall returns but limits maximum loss, functioning like portfolio insurance. Suitable for investors holding appreciated stock who want downside protection without selling.

Example: An investor owns 100 shares of XYZ stock purchased at $40, now trading at $60. Concerned about a pot...