10  •   The Intelligent Option Investor
Jargon introduced in this section is as follows:
Call option Moneyness
Put option In the money (ITM)
Range of exposure At the money (ATM)
Strike price Out of the money (OTM)
Gain exposure Premium
Accept exposure American style
Canceling exposure European style
Exercise (an option)
Visual Representation of a Stock
Visually, a good stock investment looks like this: 
5/18/2012
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20
40
60
80
100
120
140
160
180
200
5/20/2013 249 499
Date/Day Count
Stock Price
749 999
Future Stock Price
Last Stock Price
Y ou can make a lot of mistakes when investing, but as long as you are right 
about the ultimate direction a stock will take and act accordingly, all those 
mistakes will be dwarfed by the success of your position.
Good investing, then, is essentially a process of recognizing and 
exploiting the directionality of mispriced stocks. Usually, investors get 
exposure to a stock’s directionality by buying, or going long, that stock. This 
is what the investor’s risk and reward profile looks like when he or she buys 
the stock: