Options Warriors - Simple Strategies
.png)
.png)
Covered Call
Protected income strategy. Profit assured if stock remains static or rises.
​
Calls can be sold on a monthly basis to generate income Limited Reward Unlimited Risk View
​
Neutral or Bullish Credit Strategy
Greeks
Net Delta Positive
Net Vega Negative
Net Theta Positive
Factors to consider when deciding whether to take a Covered call option:
​
​​Market Outlook: Assess the current market conditions and your outlook on the underlying asset. Covered calls are typically used in neutral to slightly bullish market scenarios, where you expect the underlying asset's price to remain relatively stable or increase slightly.
​
Volatility: Evaluate the volatility of the underlying asset. Covered calls work best in moderately volatile markets. High volatility can increase option premiums, making covered calls more attractive, while low volatility may result in lower premiums and less income generation.
​
Income Objective: Determine your income objectives and risk tolerance. Covered calls provide income through the premiums received from selling the call option. Consider whether the potential income generated aligns with your financial goals and risk tolerance.
​
Asset Ownership: Ensure you own the underlying asset that you plan to write the call option against. Covered calls involve selling call options on assets you already own (hence "covered"), providing downside protection in case the option is exercised.
​
Strike Price Selection: Choose an appropriate strike price for the call options based on your price target for the underlying asset and your risk tolerance. Selling out-of-the-money (OTM) call options may offer higher premiums but lower probabilities of the option being exercised, while selling in-the-money (ITM) call options may offer lower premiums but higher probabilities of the option being exercised.
.png)
.png)
Protective Put
Protected income strategy. Profit assured if stock remains static or Down
​
Put can be sold on a monthly basis to generate income Limited Reward Unlimited Risk View
​
Neutral or Bearish Credit Strategy
Greeks
Net Delta Negative
Net Vega Negative
Net Theta Positive
Factors to consider when deciding whether to take a Protective Put option:
​
Market Outlook: Assess the current market conditions and your outlook on the underlying asset. Protective puts are commonly used when an investor is bullish on the long-term prospects of the asset but seeks short-term protection against potential downside risk. Consider factors such as economic indicators, industry trends, and company fundamentals.
​
Risk Tolerance: Evaluate your risk tolerance and investment objectives. Protective puts provide downside protection by guaranteeing a minimum sell price for the underlying asset. Consider whether the potential cost of purchasing the put option aligns with your risk tolerance and financial goals.
​
Portfolio Composition: Analyze your existing portfolio holdings and their exposure to the underlying asset. Protective puts can be particularly useful for concentrated positions or assets with significant downside risk. Assess whether adding a protective put option would enhance portfolio diversification and risk management.
​
Cost of the Put Option: Calculate the cost of purchasing the put option relative to the value of the underlying asset. The cost of protection (the premium paid for the put option) will depend on factors such as the strike price, expiration date, and implied volatility. Determine whether the cost of the put option justifies the potential downside protection it provides.
​
Time Horizon: Consider your investment time horizon and the duration of the protective put option. Protective puts are typically short- to medium-term hedges against potential downside risk. Ensure that the expiration date of the put option aligns with your investment timeframe and risk management strategy.
​
Volatility: Assess the historical and implied volatility of the underlying asset. Higher volatility generally leads to higher options premiums, increasing the cost of purchasing protective puts. Evaluate whether current volatility levels justify the cost of protection and consider alternative risk management strategies if volatility is unusually high.
.png)
Collar
Can be a riskless strategy if executed correctly with the right stock.
​
Net debit out of your account. Works best for long-term trades where you leave it alone.
​
View Bullish Low Margin Compared to futures Debit Strategy
Greeks
Net Delta Positive
Net Vega Negative
Net Theta Positive
Factors to consider when deciding whether to take a Collar option:
​
Market Outlook: Assess the current market conditions and your outlook on the underlying asset. Collar options are typically used when an investor is moderately bullish on the asset but seeks to limit downside risk. Consider factors such as economic indicators, industry trends, and company fundamentals to determine the suitability of a collar strategy.
​
Risk Tolerance: Evaluate your risk tolerance and investment objectives. Collar options provide a structured approach to risk management by capping both potential gains and losses. Consider whether the risk-return profile of a collar strategy aligns with your risk tolerance and financial goals.
​
Portfolio Composition: Analyze your existing portfolio holdings and their exposure to the underlying asset. Collar options can be particularly useful for protecting concentrated positions or assets with significant downside risk. Assess whether implementing a collar strategy would enhance portfolio diversification and risk management.
​
Cost of the Collar: Calculate the cost of implementing the collar strategy, which involves purchasing a protective put option and selling a covered call option. The cost of the collar will depend on factors such as the strike prices, expiration dates, and implied volatility of the options involved. Determine whether the cost of the collar justifies the potential risk reduction it provides.
​
Time Horizon: Consider your investment time horizon and the duration of the collar options. Collar strategies are typically short- to medium-term hedges against downside risk. Ensure that the expiration dates of the put and call options align with your investment timeframe and risk management objectives.
​
Volatility: Assess the historical and implied volatility of the underlying asset. Higher volatility generally leads to higher options premiums, affecting the cost of implementing the collar strategy. Evaluate whether current volatility levels justify the cost of protection and consider alternative risk management strategies if volatility is unusually high.
​
Flexibility and Adjustability: Consider the flexibility of the collar strategy and your ability to adjust the position over time. Collar options can be adjusted by rolling the options forward, changing strike prices, or closing out the position entirely. Evaluate whether the collar strategy provides sufficient flexibility to adapt to changing market conditions and investment objectives.
.png)
Cash Secured Put
Sell a put
​
Keep cash to buy the stock if exercised.​
​
View Neutral to Bullish Future Margin required credit Strategy
Greeks
Net Delta Positive
Net Vega Negative
Net Theta Positive
Here are some key factors to consider when deciding whether to take a Cash Secured Put:
​
Short-term income strategy.
Limited Reward Unlimited Risk
View Neutral or momentum Bullish Future margin Requirement Credit Strategy
​
Market Outlook: Assess the current market conditions and your outlook on the underlying asset. Cash-secured puts are typically used when an investor is bullish or neutral on the asset and is willing to purchase it at a predetermined price. Consider factors such as economic indicators, industry trends, and company fundamentals to determine the suitability of a cash-secured put strategy.
​
Risk Tolerance: Evaluate your risk tolerance and investment objectives. Cash-secured puts involve the obligation to purchase the underlying asset at the strike price if the option is exercised. Consider whether you are comfortable with the potential obligation to buy the asset and whether it aligns with your risk tolerance and financial goals.
​
Strike Price Selection: Choose an appropriate strike price for the put option you plan to sell. The strike price should reflect a level at which you are comfortable purchasing the underlying asset if assigned. Consider factors such as the current market price of the asset, support levels, and your long-term investment thesis.
​
Premium Income: Assess the potential income generated from selling the put option. The premium received from selling the put provides immediate income, which can enhance portfolio returns or serve as compensation for the obligation to buy the asset if assigned. Evaluate whether the potential income justifies the risks associated with the cash-secured put strategy.
​
Margin Requirements: Consider the margin requirements for selling cash-secured puts. Typically, brokers require investors to set aside cash or cash equivalents equal to the full purchase price of the underlying asset. Ensure that you have sufficient funds in your account to cover the potential obligation to purchase the asset if assigned.
​
Time Horizon: Consider your investment time horizon and the duration of the put option. Cash-secured puts are typically short- to medium-term strategies, as they involve selling put options with near-term expiration dates. Ensure that the expiration date of the put option aligns with your investment goals and timeframe.
​
Volatility: Assess the volatility of the underlying asset. Higher volatility generally leads to higher options premiums, increasing the potential income from selling cash-secured puts. Evaluate whether current volatility levels justify the risks associated with the strategy and consider adjusting strike prices or expiration dates accordingly.
.png)
Bull Call Spread
Limited risk lower breakeven point than simply buying a call.
​
Limited Reward
​
View Neutral to Bullish Low Margin Compared to futures Debit Strategy
Greeks
Net Delta Positive
Net Vega Positive
Net Theta Negative
Factors to consider when deciding whether to take a Bull call spread or Long call spread option:
​
Market Outlook: Assess the current market conditions and your outlook on the underlying asset. Bull call spreads are bullish strategies, meaning they are used when you expect the price of the underlying asset to rise. Consider factors such as economic indicators, industry trends, and company fundamentals to determine the suitability of a bull call spread strategy.
​
Risk Tolerance: Evaluate your risk tolerance and investment objectives. Bull call spreads involve limited risk compared to buying a call option outright, as the maximum loss is capped at the initial premium paid for the spread. Consider whether the potential risk and reward profile of the bull call spread aligns with your risk tolerance and financial goals.
​
Strike Price Selection: Choose appropriate strike prices for the long and short call options in the spread. The strike prices should reflect your expectations for the underlying asset's price movement. Select a lower strike price for the long call option and a higher strike price for the short call option to establish a bullish bias while limiting potential losses.
​
Premium Cost: Assess the cost of initiating the bull call spread. Calculate the net debit or cost of the spread, which is the difference in premiums between the long and short call options. Consider whether the potential profit potential justifies the initial cost of the spread and whether it aligns with your budget and risk management strategy.
​
Break-Even Point: Determine the break-even point for the bull call spread. The break-even point is the level at which the underlying asset's price must reach for the spread to be profitable at expiration. Consider whether the break-even point aligns with your price target for the underlying asset and whether it is achievable within the desired timeframe.
​
Time Horizon: Consider your investment time horizon and the duration of the bull call spread. Bull call spreads are typically short- to medium-term strategies, as they involve buying and selling call options with near-term expiration dates. Ensure that the expiration dates of the options align with your investment goals and timeframe.
​
Volatility: Assess the volatility of the underlying asset. Higher volatility generally leads to higher options premiums, affecting the cost of initiating the bull call spread. Evaluate whether current volatility levels justify the cost of the spread and consider adjusting strike prices or expiration dates accordingly.
Bear Put Spread
Limited risk lower breakeven point than simply buying a put.
​
Limited Reward
​
View Neutral to Bearish Low Margin Compared to futures Debit Strategy
Greeks
Net Delta Negative
Net Vega Positive
Net Theta Negative
Factors to consider when deciding whether to take a Bear put spread or Long put spread option:
​
Market Outlook: Assess the current market conditions and your outlook on the underlying asset. Bear put spreads are bearish strategies, meaning they are used when you expect the price of the underlying asset to decline. Consider factors such as economic indicators, industry trends, and company fundamentals to determine the suitability of a bear put spread strategy.
​
Risk Tolerance: Evaluate your risk tolerance and investment objectives. Bear put spreads involve limited risk compared to buying a put option outright, as the maximum loss is capped at the initial premium paid for the spread. Consider whether the potential risk and reward profile of the bear put spread aligns with your risk tolerance and financial goals.
​
Strike Price Selection: Choose appropriate strike prices for the long and short put options in the spread. The strike prices should reflect your expectations for the underlying asset's price movement. Select a higher strike price for the long put option and a lower strike price for the short put option to establish a bearish bias while limiting potential losses.
​
Premium Cost: Assess the cost of initiating the bear put spread. Calculate the net debit or cost of the spread, which is the difference in premiums between the long and short put options. Consider whether the potential profit potential justifies the initial cost of the spread and whether it aligns with your budget and risk management strategy.
​
Break-Even Point: Determine the break-even point for the bear put spread. The break-even point is the level at which the underlying asset's price must fall for the spread to be profitable at expiration. Consider whether the break-even point aligns with your price target for the underlying asset and whether it is achievable within the desired timeframe.
​
Time Horizon: Consider your investment time horizon and the duration of the bear put spread. Bear put spreads are typically short- to medium-term strategies, as they involve buying and selling put options with near-term expiration dates. Ensure that the expiration dates of the options align with your investment goals and timeframe.
​
Volatility: Assess the volatility of the underlying asset. Higher volatility generally leads to higher options premiums, affecting the cost of initiating the bear put spread. Evaluate whether current volatility levels justify the cost of the spread and consider adjusting strike prices or expiration dates accordingly.
.png)
.png)
Bear Call Spread
Limited risk Bearish income strategy
​
Limited Reward Risk higher than normal bear put spread
​
View Neutral to Bearish Low Margin Compared to futures Credit Strategy
Greeks
Net Delta Negative
Net Vega Positive
Net Theta Negative
Factors to consider when deciding whether to take a Bear call spread or Short call spread option:
​
Market Outlook: Assess the current market conditions and your outlook on the underlying asset. Bear call spreads are bearish strategies, meaning they are used when you expect the price of the underlying asset to decrease or remain below a certain level. Consider factors such as economic indicators, industry trends, and company fundamentals to determine the suitability of a bear call spread strategy.
​
Risk Tolerance: Evaluate your risk tolerance and investment objectives. Bear call spreads involve limited risk compared to selling a call option outright, as the maximum loss is capped at the difference in strike prices minus the net premium received. Consider whether the potential risk and reward profile of the bear call spread aligns with your risk tolerance and financial goals.
​
Strike Price Selection: Choose appropriate strike prices for the long and short call options in the spread. The strike prices should reflect your expectations for the underlying asset's price movement. Select a lower strike price for the short call option and a higher strike price for the long call option to establish a bearish bias while limiting potential losses.
​
Premium Income: Assess the premium income generated from selling the call option in the spread. The premium received provides immediate income, which can enhance portfolio returns or serve as compensation for potential losses if the underlying asset's price rises. Consider whether the potential income justifies the risks associated with the bear call spread strategy.
​
Break-Even Point: Determine the break-even point for the bear call spread. The break-even point is the level at which the underlying asset's price must rise for the spread to be profitable at expiration. Consider whether the break-even point aligns with your price target for the underlying asset and whether it is achievable within the desired timeframe.
​
Time Horizon: Consider your investment time horizon and the duration of the bear call spread. Bear call spreads are typically short- to medium-term strategies, as they involve selling and buying call options with near-term expiration dates. Ensure that the expiration dates of the options align with your investment goals and timeframe.
​
Volatility: Assess the volatility of the underlying asset. Higher volatility generally leads to higher options premiums, affecting the potential income generated from selling the call option. Evaluate whether current volatility levels justify the risk-reward profile of the bear call spread and consider adjusting strike prices or expiration dates accordingly.
.png)
.png)
Bull Put Spread
Limited risk lower breakeven point than simply buying a put net credit into your account.
​
Limited Reward
​
View Neutral to Bullish Low Margin Compared to futures Credit Strategy
Greeks
Net Delta Positive
Net Vega Negative
Net Theta Positive
Factors to consider when deciding whether to take a Bull put spread or Short put spread option:
​
Market Outlook: Assess the current market conditions and your outlook on the underlying asset. Bull put spreads are bullish strategies, meaning they are used when you expect the price of the underlying asset to rise or remain above a certain level. Consider factors such as economic indicators, industry trends, and company fundamentals to determine the suitability of a bull put spread strategy.
​
Risk Tolerance: Evaluate your risk tolerance and investment objectives. Bull put spreads involve limited risk compared to selling a put option outright, as the maximum loss is capped at the difference in strike prices minus the net premium received. Consider whether the potential risk and reward profile of the bull put spread aligns with your risk tolerance and financial goals.
​
Strike Price Selection: Choose appropriate strike prices for the short and long put options in the spread. The strike prices should reflect your expectations for the underlying asset's price movement. Select a higher strike price for the short put option and a lower strike price for the long put option to establish a bullish bias while limiting potential losses.
​
Premium Income: Assess the premium income generated from selling the put option in the spread. The premium received provides immediate income, which can enhance portfolio returns or serve as compensation for potential losses if the underlying asset's price falls. Consider whether the potential income justifies the risks associated with the bull put spread strategy.
​
Break-Even Point: Determine the break-even point for the bull put spread. The break-even point is the level at which the underlying asset's price must fall for the spread to be profitable at expiration. Consider whether the break-even point aligns with your price target for the underlying asset and whether it is achievable within the desired timeframe.
​
Time Horizon: Consider your investment time horizon and the duration of the bull put spread. Bull put spreads are typically short- to medium-term strategies, as they involve selling and buying put options with near-term expiration dates. Ensure that the expiration dates of the options align with your investment goals and timeframe.
​
Volatility: Assess the volatility of the underlying asset. Higher volatility generally leads to higher options premiums, affecting the potential income generated from selling the put option. Evaluate whether current volatility levels justify the risk-reward profile of the bull put spread and consider adjusting strike prices or expiration dates accordingly.