Options Strategies
Single-option positions
Long Call
Buy a call to benefit from a rise, with the option’s loss limited to the premium paid.
Short Call
Sell an uncovered call for a limited premium, with no fixed loss limit if the underlying rises.
Long Put
Buy a put to benefit from a decline, with the option’s loss limited to its cost.
Short Put
Sell a put for a premium and accept the obligation to buy the underlying at the strike if assigned.
Vertical spreads
Bull Call Spread
Buy a call and sell a higher-strike call to reduce the cost of upside exposure while capping the profit.
Bear Put Spread
Buy a put and sell a lower-strike put to reduce the cost of downside exposure while capping the profit.
Bull Put Spread
Sell a put and buy a lower-strike put for protection. Profit is the opening credit when both expire worthless.
Bear Call Spread
Sell a call and buy a higher-strike call for protection. Profit is the opening credit when both expire worthless.
Straddles and strangles
Long Straddle
Buy a call and put at one strike to profit from a move large enough to recover both premiums.
Short Straddle
Sell a call and put at one strike. Profit peaks there at expiration; upside loss is unlimited and downside loss can be substantial.
Long Strangle
Buy a lower-strike put and higher-strike call. The wider strikes reduce the cost but require a larger move before either has an expiration payoff.
Short Strangle
Sell a put and call at different strikes to earn their premiums if the underlying finishes between them at expiration, with substantial downside and unlimited upside loss.
Butterflies and condors
Long Butterfly
Buy the outer calls and sell two middle calls at equally spaced strikes, concentrating expiration profit around the center.
Short Butterfly
Reverse the call butterfly to earn a limited profit outside the wings, with the largest loss at the center.
Iron Butterfly
Sell a straddle and buy outer put and call protection, limiting losses while keeping a profit peak at the middle strike.
Long Iron Butterfly
Buy a straddle and sell outer put and call wings to reduce its cost and cap profits from a large move.
Iron Condor
Combine two credit spreads to earn their full credit between the short strikes at expiration, with bounded losses after a sufficiently large move.
Long Iron Condor
Combine two debit spreads to benefit from a move beyond the inner strikes, with profits capped at the outer wings.
Ratios and risk reversals
Call Ratio Backspread
Sell one call and buy two higher-strike calls. A moderate rise can lose money; a sufficiently large rise produces uncapped profit.
Put Ratio Backspread
Sell one put and buy two lower-strike puts. A moderate decline can lose money; a sufficiently large decline produces a bounded profit.
Risk Reversal
Partly finance a purchased call by selling a lower-strike put, combining uncapped upside with substantial downside exposure.
Bearish Risk Reversal
Buy a lower-strike put and sell a higher-strike call to reduce its cost, retaining gains from a decline with unlimited loss on a rise.