16 lines
1017 B
Plaintext
16 lines
1017 B
Plaintext
Strategies and At-Expiration
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Diagrams
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One of the great strengths of options is that there are so many different
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ways to use them. There are simple, straightforward strategies like buying a
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call. And there are complex spreads with creative names like jelly roll, guts,
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and iron butterfly. A spread is a strategy that involves combining an option
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with one or more other options or stock. Each component of the spread is
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referred to as a leg. Each spread has its own unique risk and reward
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characteristics that make it appropriate for certain market outlooks.
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Throughout this book, many different spreads will be discussed in depth.
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For now, it’s important to understand that all spreads are made up of a
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combination of four basic option positions: buy call, sell call, buy put, and
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sell put. Understanding complex option strategies requires understanding
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these basic positions and their common, practical uses. When learning
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options, it’s helpful to see what the option’s payout is if it is held until
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expiration. |