20  •   The Intelligent Option Investor
Any time a gain of exposure overlaps another gain of exposure, 
the potential gain from an investment if the stock price moves into that 
region rises. We will not represent this in the diagrams of this book, 
but you can think of overlapping gains as deeper and deeper shades of 
green (when gaining exposure) and deeper and deeper shades of red  
(when accepting it).
Now that you understand how to graphically represent gaining and 
accepting exposure to both upside and downside directionality and how to 
represent situations when opposing exposures overlap, we can move onto 
the next section, which introduces the great flexibility options grant to an 
investor and discusses how that flexibility can be used as a force of either 
good or evil.
Flexibility
Again, the main takeaway of this section should be obvious from the title. 
Here we will see the only two choices stock investors have with regard to 
risk and return, and we will contrast that with the great flexibility an option 
investor has. We will also discuss the concept of an effective buy price and 
an effective sell price—two bits of intelligent option investor jargon. Last, 
we will look at a typical option strategy that might be recommended by 
an option “guru” and note that these types of strategies actually are at 
cross-purposes with the directional nature of options that makes them so 
powerful in the first place.
Jargon introduced in this chapter is as follows:
Effective buy price (EBP) Covered call
Effective sell price (ESP) Long strangle
Leg
Stocks Give Investors Few Choices
A stock investor only has two choices when it comes to investing: going 
long or going short. Using our visualization technique, those two choices 
look like this: