Trading Strategies Involving Options Chapter 9

Three Alternative Strategies Take a position in the option and the underlying Take a position in 2 or more options of the same type (A spread) Combination: Take a position in a mixture of calls & puts (A combination)

Positions in an Option & the Underlying (Figure 9.1, page 203) Profit STST X STST X STST X STST X (a) (b) (c)(d)

Bull Spread Using Calls (Figure 9.2, page 204) X1X1 X2X2 Profit STST

Bull Spread Using Puts Figure 9.3, page 206 X1X1 X2X2 Profit STST

Bear Spread Using Calls Figure 9.4, page 206 X1X1 X2X2 Profi t STST

Bear Spread Using Puts Figure 9.5, page 207 X1X1 X2X2 Profit STST

Butterfly Spread Using Calls Figure 9.6, page 208 X1X1 X3X3 Profit STST X2X2

Butterfly Spread Using Puts Figure 9.7, page 209 X1X1 X3X3 Profit STST X2X2

Calendar Spread Using Calls Figure 9.8, page 210 Profit STST X

Calendar Spread Using Puts Figure 9.9, page 211 Profit STST X

A Straddle Combination Figure 9.10, page 212 Profit STST X

Strip & Strap Figure 9.11, page 213 Profit XSTST XSTST StripStrap

A Strangle Combination Figure 9.12, page 214 X1X1 X2X2 Profit STST