Questions and Answers
What is the primary purpose of a covered call option?
To earn premium income
Which of the following is NOT a vertical spread?
Bear put spread
What is the difference between a long straddle and a long strangle?
The strike price is the same for both call and put options in a long straddle, but different in a long strangle
What is the author's opinion on technical analysis?
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What is technical analysis?
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Why is it important to have a basic understanding of technical analysis even if you don't use it?
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Study Notes
Options Trading Cheat Sheet: Key Strategies and Concepts
- Long call and long put options are used to make a profit when stock prices rise and fall, respectively.
- Short call and short put options involve selling options to earn premium income and limit losses.
- Bull call spread and bear call spread are vertical spreads that involve buying and selling call options at different strike prices.
- Bull put spread and bear put spread are vertical spreads that involve buying and selling put options at different strike prices.
- Long straddle and short straddle options involve buying or selling both call and put options at the same strike price and expiration date.
- Long strangle and short strangle options involve buying or selling both call and put options at different strike prices but with the same expiration date.
- Long call butterfly and short call butterfly spreads are established by buying or selling a combination of in-the-money, at-the-money, and out-of-the-money call options.
- Long put butterfly and short put butterfly spreads are established by buying or selling a combination of in-the-money, at-the-money, and out-of-the-money put options.
- Long call condor and short call condor spreads involve buying or selling a combination of in-the-money, at-the-money, and out-of-the-money call options at different strike prices.
- Long put condor and short put condor spreads involve buying or selling a combination of in-the-money, at-the-money, and out-of-the-money put options at different strike prices.
- Covered call and covered put options involve selling call or put options while holding the underlying stock or shorting the underlying stock, respectively.
- The options trading cheat sheet is a downloadable resource that provides a quick reference guide to the key option strategies and their profit and loss graphs.
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