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Chapter 9
GaininG ExposurE
This chapter is designed as an encyclopedic listing of the main strategies 
for gaining exposure (i.e., buying options) that an intelligent option inves-
tor should understand. Gaining exposure seems easy in the beginning be-
cause it is straightforward—simply pay your premium up front, then if the 
stock moves into your option’s range of exposure by expiration time, you 
win. However, the more you use these strategies in investing exposure, the 
more nuances arise.
What tenor should I choose? What strike price should I choose? 
Should I exercise early if my option is in the money (ITM)? How much 
capital should I commit to a given trade? If the stock price goes in the 
opposite direction from my option’s range of exposure, should I close 
my option position? All these questions are examples of why gaining 
exposure by buying options is not as straightforward a process as it 
may seem at first and are all the types of questions I will cover in the 
following pages.
Gaining exposure means buying options, and the one thing that an 
option buyer must never lose sight of is that time is always working against 
him or her. Options expire. If your options expire out of the money (OTM), 
the capital you spent on premiums on those options is a realized loss. No 
matter how confident you are about your valuation call, you should al-
ways keep this immutable truth of option buying in mind. Indeed, there 
are ways to reduce the risk of this happening or to manage a portfolio in