Options Strategies

A covered call owns stock and sells a call against it. The premium helps offset downside, but upside is capped above the short call strike. It can fit a mildly bullish or income-focused view on a stock you are willing to hold.

• Best fit: neutral to moderately bullish outlook.
• Main risk: the stock falls more than the premium collected.
• Key metrics: breakeven, max profit, stock IV, and event risk.

A cash-secured put sells a put while reserving cash to buy shares if assigned. The seller collects premium and may end up owning stock below the strike.

• Best fit: willingness to buy the stock at an effective lower price.
• Main risk: stock downside after assignment.
• Key metrics: breakeven, max loss, margin required, and event risk.

A vertical spread uses options with the same expiration and different strikes. Debit spreads pay a net debit for directional exposure. Credit spreads collect a net credit and define risk with a farther option.

A credit spread sells a closer option and buys a farther option for protection. Max profit is usually the credit received; max loss is spread width minus the credit.

• Best fit: directional or range view where premium collection is attractive.
• Main risk: the underlying moves through the short strike and toward the long strike.

A debit spread buys a closer option and sells a farther option to reduce cost. Max loss is the debit paid; max profit is spread width minus the debit.

• Best fit: directional view with capped risk and capped reward.
• Main risk: the move does not happen before expiration.

An iron condor combines a call credit spread and a put credit spread. It is usually a range-bound strategy that benefits when the underlying stays between the short strikes.

• Best fit: neutral outlook with attractive premium.
• Main risk: a large move beyond either side of the range.

A calendar sells a short-dated option and buys a longer-dated option at the same strike. It usually has positive vega and can benefit if implied volatility rises or the underlying stays near the strike.

A diagonal sells a short-dated option and buys a longer-dated option at a different strike. It blends directional exposure, time decay, and volatility exposure.

A hedged calendar is a calendar-style position selected with a model hold window and additional controls around directional or residual exposure.

A bull diagonal is a diagonal spread with a bullish directional bias. It can fit a rising-stock view where the trader wants longer-dated exposure partly funded by a short option.

A bear diagonal is a diagonal spread with a bearish directional bias. It can fit a falling-stock view while keeping the position structure bounded by the selected legs.