Option Fundamentals   • 21
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Going long a stock (i.e., buying 
a stock).
    Going short a stock (i.e., short 
selling a stock).
If you want to gain exposure to a stock’s upside potential by going 
long (left-hand diagram), you also must simultaneously accept exposure to 
the stock’s downside risk. Similarly, if you want to gain exposure to a stock’s 
downside potential by going short (right-hand diagram), you also must ac-
cept exposure to the stock’s upside risk. 
In contrast, option investors are completely unrestrained in their 
ability to choose what directionality to accept or gain. An option investor 
could, for example, very easily decide to establish exposure to the direc-
tionality of a stock in the following way:
5/18/2012
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5/20/2013 249 499
Date/Day Count
Stock Price
749 999
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Why an investor would want to do something like this is completely beyond 
me, but the point is that options are flexible enough to allow this type of a 
crazy structure to be built.