Strategy Sullllllary 
Except for arbitrage strategies and tax strategies, the strategies we have described 
deal with risk of market movement. It is therefore often convenient to summarize 
option strategies by their risk and reward characteristics and by their market out­
look-bullish, bearish, or neutral. Table A-1 lists all the risk strategies that were dis­
cussed and gives a general classification of their risks and rewards. If a strategist has 
a definite attitude about the market's outlook or about his own willingness to accept 
risks, he can scan Table A-1 and select the strategies that most closely resemble his 
thinking. The number in parentheses after the strategy name indicates the chapter in 
which the strategy was discussed. 
Table A-1 gives a broad classification of the various risk and reward potentials 
of the strategies. For example, a bullish call calendar spread does not actually have 
unlimited profit potential unless its near-tenn call expires worthless. In fact, all cal­
endar spread or diagonal spread positions have limited profit potential at best until 
the near-term options expire. 
Also, the definition of limited risk can vary widely. Some strategies do have a 
risk that is truly limited to a relatively small percentage of the initial investment-the 
protected stock purchase, for example. In other cases, the risk is limited but is also 
equal to the entire initial investment. That is, one could lose 100% of his investment 
in a short time period. Option purchases and bull, bear, or calendar spreads are 
examples. 
Thus, although Table A-1 gives a broad perspective on the outlook for various 
strategies, one must be aware of the differences in reward, risk, and market outlook 
when actually implementing one of the strategies. 
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