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Here is how those types stack up: Income strategies. These include covered calls and cash-secured puts involve selling options to collect premiums upfront. This generates income, but also caps ...
1. Long call. In this option trading strategy, the trader buys a call — referred to as “going long” a call — and expects the stock price to exceed the strike price by expiration. The ...
Options trading is not for novices, but for seasoned investors who want to add another dimension to their portfolios, hedge against risk, limit downside losses or take big chances in the pursuit of...
Iron butterfly (options strategy) In finance an iron butterfly, also known as the ironfly, is the name of an advanced, neutral-outlook, options trading strategy that involves buying and holding four different options at three different strike prices. It is a limited-risk, limited-profit trading strategy that is structured for a larger ...
An option is a contract that allows the holder the right to buy or sell an underlying asset or financial instrument at a specified strike price on or before a specified date, depending on the form of the option. Selling or exercising an option before expiry typically requires a buyer to pick the contract up at the agreed upon price.
A condor is a limited-risk, non-directional options trading strategy consisting of four options at four different strike prices. The buyer of a condor earns a profit if the underlying is between or near the inner two strikes at expiry, but has a limited loss if the underlying is near or outside the outer two strikes at expiry.
Here are the major terms to know when trading options: Underlying stock: The stock represented by the option. Each stock has its own distinct set of options. Strike price: ...
A long butterfly options strategy consists of the following options : Long 1 call with a strike price of (X − a) Short 2 calls with a strike price of X. Long 1 call with a strike price of (X + a) where X = the spot price (i.e. current market price of underlying) and a > 0. Using put–call parity a long butterfly can also be created as follows:
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