Long Put
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| how | Buy a put (A). |
| when | Market bearish/volatility bullish. The more bearish the expectation, the further out-of-the-money (lower strike) the purchased put should be. A Long Put combines limited upside exposure with high gearing in a falling market. |
| Profit | Effectively unlimited in a falling market. |
| Loss | Limited to the initial premium paid. |
| Even | Reached when the underlying falls below the strike price A by the same amount as the premium paid to establish the position. |
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Long Put Spread
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| how | Buy a put (B), sell put at lower strike (A). |
| when | Market bearish/volatility neutral. The spread has the advantage of being cheaper to establish than the purchase of a single put, as the premium received from the sold put reduces the overall cost. The spread offers a limited loss exposure if the underlying rises, and a limited profit if the underlying falls. |
| Profit | Limited to the difference between the two strikes minus net premium cost. Maximum profit occurs where underlying falls to the level of the lower strike A or below. |
| Loss | Limited to the initial premium paid in establishing the position. Maximum loss occurs where the underlying rises to the level of the higher strike B or above. |
| Even | Reached when the underlying is below strike price B by the same amount as the net cost of establishing the position. |
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Long Combo
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| how | Sell a call (B), buy put at lower strike (A). |
| when | Has same profile as synthetic split strike short future.
Market expectation: Market bearish/volatility neutral. The risk/reward profile is similar to that of a short future except that there is a plateau (A-B) over which there will be no change in profit/loss. The plateau makes this a more suitable trade than a short future if volatility expectations are uncertain. |
| Profit | Unlimited in a falling market. |
| Loss | Unlimited in a rising market. |
| Even | Depending on the strikes chosen, the position may yield a small premium cost or credit. If the position is established at a net cost, break-even will occur where the market falls below point A by the same amount. If the position is established at a credit, break-even will occur where the market rises above point B by the same amount. |
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Long Put Strip
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| how | Buy put at strike A, buy puts at lower strike prices. Between 3 and 8 strikes may be used in total, with one put option purchased at each. In the graph above, a 4-option strip is shown. All put options must be for the same expiry month. This strategy is not available for individual equity options or commodity options. |
| when | Direction bearish/volatility bullish. A long put strip gives the holder an increased exposure to a decline in the underlying price. |
| Profit | Unlimited in a falling market. |
| Loss | Limited to the initial premium. |
| Even | There will be a single break-even position, but the position in relation to the strikes will depend on the strike prices involved and the premium paid. |
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Long Two by One Ratio Put Spread
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| how | Sell a put (B), buy two puts at lower strike (A). |
| when | Market bearish/volatility bullish. Holder expects market to fall below A. Position usually established by selling an at or close to the money put (B), and buying two out-of-the-money puts (A), such that although it is a net long position, it can be established at a small credit as in the above example. Depending on the strikes chosen, the position could also be established at break-even or at a small premium cost. |
| Profit | Unlimited in a falling market. At B or above, profit limited to net credit. |
| Loss | Greatest loss which occurs at lower strike A, is the difference between strikes B-A minus (plus) net credit (debit) |
| Even | Lower break-even reached when the combined intrinsic value of the two purchased puts at A, plus (minus) the initial credit (debit) from establishing the position, are equal to the value of the written put B. Higher break-even point reached when intrinsic value of option B is equal to initial credit. If initial position established at a net cost, there is no higher break-even point. |
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Long Call Ladder
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| how | Buy a call (A), sell call at higher strike (B), sell call at an even higher strike (C). |
| when | Direction bearish/volatility bearish. In this case the holder expects the market to settle between B and C but feels that volatility will not rise. |
| Profit | Limited to the difference between strikes A and B plus (minus) net credit (debit). Greatest profit occurs between strikes B and C. |
| Loss | Unlimited if underlying rallies. At A or below, loss limited to net cost. |
| Even | Lower break-even reached when the underlying exceeds the lower strike option A, by the same amount as the net cost of the position. Higher break-even point reached when the intrinsic value of option A, plus (minus) the net credit (debit) from establishing the position, is equal to the intrinsic value of the two higher strike options at B and C. |
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Long Put Spread versus Call
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| how | Buy put (B), sell put at lower strike (A), sell call at any strikethe short call will generally be at a higher strike than both puts (C). The profile is similar to that of a long put spread, but with greater intake of premium due to the short call. |
| when | Market bearish/volatility bearish. |
| Profit | Limited in a falling market. |
| Loss | Unlimited in a rising market. |
| Even | If the position is created at a net debit, break-even is reached when the underlying falls below strike B by the net amount of premium paid. If the position is opened at a net credit, break-even occurs when the underlying rises above strike C by the premium received. |
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Short Call
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| how | Sell a call (A). |
| when | Market bearish/volatility bearish. Holder expects a gradual fall in the market and lower volatility. The optimal strike is dependent on time decay and vega level; although, in general, the more bearish the expectation, the greater the sold option should be in-the-money (lower strike) in order to maximise premium income. Profit is limited to the premium received and thus if the market view is more than moderately bearish, a Long Put may yield higher profits. |
| Profit | Limited to the premium received from selling the call. |
| Loss | Unlimited in a rising market. |
| Even | reached when the underlying rises above the strike price A, by the same amount as the premium received from selling the call. |
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Short Call Spread
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| how | Sell a call (A), buy call at higher strike (B). |
| when | Market bearish/volatility neutral. The Short Call at A aims to take advantage of a bearish market and the premium gained affords some upside protection with a Long Call at B. The spread offers a limited profit if the underlying falls and a limited loss exposure if the underlying rises. |
| Profit | Limited to the net premium credit. Maximum profit occurs where underlying falls to the level of the lower strike A or below. |
| Loss | Limited to the difference between the two strikes minus the net credit received in establishing the position. Maximum loss occurs where the underlying rises to the level of the higher strike B or above. |
| Even | Reached when the underlying is above strike price A by the same amount as the net credit of establishing the position. |
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Short Put Ladder
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| how | Buy put (A), buy put at higher strike (B), sell put at equally higher strike (C). |
| when | Direction bearish/volatility bullish. Buyer expects a volatile market and additional profits can be made in a bearish market. |
| Profit | Unlimited if underlying falls. At C or above, profit limited to the net credit. |
| Loss | Limited to the difference between B and C minus (plus) net credit (debit). |
| Even | Higher break-even reached when the market falls below C by the value of the net credit. Lower break-even reached when the intrinsic value of options A and B plus (minus) the net credit (debit) is equal to the intrinsic value of C. |
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Synthetic Short Underlying
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| how | Buy put, sell call at the same strike (generally the at-the-money strike). This strategy is effectively a Conversion without the purchase of the underlying. |
| when | Market bearish/volatility neutral. |
| Profit | Unlimited in a falling market |
| Loss | Unlimited in a rising market |
| Even | If the position is opened at a net debit, break-even is reached when the underlying falls below the strike price of the strategy by the net amount of premium paid. If the position is created at a net credit, break-even occurs when the underlying rises above the strike price by the net premium received. |
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Short Call Spread versus Put
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| how | Sell call (B), buy call at higher strike (C), buy put at any strike -the long put will generally be at a strike lower than both calls (A). This spread has a similar profile to the short call spread, but the long put provides unlimited profit potential in a falling market. |
| when | Market bearish/volatility bullish. |
| Profit | Unlimited in a falling market |
| Loss | Limited in a rising market |
| Even | If the position is created at a net debit, break-even is reached when the underlying falls below strike A by the net amount of premium paid. If the position is opened at a net credit, break-even occurs when the underlying rises above strike B by the net premium received. |
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Strategies | Neutral Strategies | Bearish 
Strategies