Explore options strategies and tradeoffs
Follow these articles in order, or open any explanation on its own. Each step includes examples and a question to check your understanding.
Browse the full library →- Step 1 · Concept explained
Options Explained: Calls, Puts, Buyers and Sellers
An option is a contract with specific rights for its buyer and obligations for its seller. Start with the underlying, strike, expiration, premium and deliverable before looking at a strategy.
- Step 2 · Concept explained
Exercise, Assignment and Expiration: What Actually Happens
Exercise uses an option’s contractual right; assignment allocates the corresponding obligation to a short position. Those events can create stock or cash obligations that a payoff chart alone does not show.
- Step 3 · Concept explained
The Options Greeks: Delta, Gamma, Theta, Vega and Rho
The Greeks estimate how an option’s value responds locally to changes in price, time, implied volatility and interest rates. Read the units and the whole position, not just a single number.
- Step 4 · Strategy explained
Long Calls and Long Puts: Direction, Timing and Premium
Buying a call or put creates a limited-premium option position, but the stock must move far enough, soon enough, to overcome its cost at expiration.
- Step 5 · Strategy explained
Covered Calls: Premium Income, Capped Upside and Stock Risk
A covered call combines shares with a short call against those shares. The premium provides a small cushion while the call caps upside and can cause the shares to be sold.
- Step 6 · Strategy explained
Cash-Secured Puts: Purchase Obligations and Downside
A cash-secured put sells a put while reserving enough cash to buy the shares if assigned. The reserve funds the obligation; it does not prevent a loss.
- Step 7 · Strategy explained
Protective Puts: A Defined Floor with an Ongoing Cost
A protective put combines stock with a purchased put. It places a floor under the position’s expiration value for a specified period, at the cost of the premium.
- Step 8 · Strategy explained
Option Collars: Trading Some Upside for Downside Protection
A collar holds stock, buys a put and sells a call. The call premium can offset the put’s cost while limiting gains above the call strike.
- Step 9 · Strategy explained
Vertical Debit Spreads: Bull Calls and Bear Puts
A debit vertical buys an option and sells another of the same type and expiration at a different strike. The short leg reduces entry cost while limiting the favorable expiration payoff.
- Step 10 · Strategy explained
Vertical Credit Spreads: Bear Calls and Bull Puts
A credit vertical receives premium by selling one option and buying a farther protective option of the same type and expiration. The credit is the maximum expiration profit under the stated structure.
- Step 11 · Strategy explained
Long Straddles and Strangles: Paying for a Large Move
A long straddle buys a call and put at the same strike; a long strangle uses different strikes. Both pay premiums to benefit from a sufficiently large move in either direction.
- Step 12 · Strategy explained
Iron Condors: A Range Trade with Four Option Legs
A short iron condor combines a put credit spread and a call credit spread with one expiration. It earns a limited credit if the underlying remains in the favorable region, while retaining losses outside it.