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Options

Options.End to end.

Calls, puts, spreads, the Greeks — the rich library powering DTI's curriculum.

LESSONS

29 total
[ 01 ]Beginner5 min

What Is an Option?

Think of an option like a reservation. You pay a small fee to reserve the right to buy a house at a set price for the next 90 days. If the house value goes up, your reservation is valuable. If it goes down, you just walk away and only lose your reservation fee.

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[ 02 ]Beginner4 min

Calls vs. Puts

Call = Right to BUY at a specific price (you want the stock to go UP). Put = Right to SELL at a specific price (you want the stock to go DOWN). These are the two building blocks of every options strategy.

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[ 03 ]Beginner5 min

Long vs. Short Options

Being 'long' an option means you bought it — you hold rights. Being 'short' an option means you sold it — you hold obligations. Buyers pay a premium and have limited risk. Sellers collect a premium but take on potentially large risk.

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[ 04 ]Beginner6 min

Strike Price, Expiration & Moneyness

The strike price is the price you get to buy or sell the stock at. The expiration is the deadline. Moneyness tells you whether the option is 'winning' (in-the-money), 'losing' (out-of-the-money), or 'tied' (at-the-money) right now.

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[ 05 ]Beginner4 min

Premium, Debit & Credit

The premium is the price of an option. When you pay money to enter a trade, that's a debit. When you receive money to enter a trade, that's a credit. Simple as that.

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[ 06 ]Beginner5 min

Intrinsic vs. Extrinsic Value

Intrinsic value is real, tangible value — the profit you'd lock in if you exercised right now. Extrinsic value is hope value — the extra amount you pay for the possibility that the stock moves more before expiration.

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[ 07 ]Beginner6 min

How Options Are Priced

An option's price isn't random. It's determined by six factors: the stock price, the strike price, time until expiration, volatility, interest rates, and dividends. Models like Black-Scholes calculate a 'fair value' based on these inputs.

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[ 08 ]Beginner7 min

How to Read an Options Chain

An options chain is basically a menu. It shows you every available option for a stock, organized by expiration date and strike price. Calls on the left, puts on the right, with key data like bid, ask, volume, and open interest.

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[ 09 ]Beginner5 min

Defined Risk vs. Undefined Risk

A defined-risk trade is like renting a car with insurance — you know the worst-case cost upfront. An undefined-risk trade is like driving without insurance — if something goes really wrong, the bill could be enormous.

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[ 10 ]Beginner5 min

Expiration & Settlement

Options have a defined lifespan. When the clock runs out, ITM options are automatically exercised and you end up with stock. OTM options simply vanish. Understanding this prevents unpleasant surprises.

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[ 11 ]Beginner5 min

Assignment & Exercise

Exercise is when you use your right as a buyer: 'I want to buy/sell those shares at the agreed price.' Assignment is when the seller gets the notice: 'Someone exercised — you must deliver.'

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[ 12 ]Intermediate6 min

Time Decay (Theta)

Every day that passes, your option loses a little bit of value, like an ice cube melting. This is Theta. If you buy options, time works against you. If you sell options, time works in your favor.

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[ 13 ]Intermediate7 min

Implied Volatility Basics

Implied Volatility (IV) is the market's best guess at how much a stock will move. High IV = expensive options (market expects big moves). Low IV = cheap options (market expects calm). IV is the single biggest factor in whether options are 'cheap' or 'expensive.'

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[ 14 ]Intermediate7 min

The Greeks Overview

The Greeks are your option's dashboard. Delta tells you directional exposure, Theta tells you time decay, Vega tells you volatility sensitivity, and Gamma tells you how fast Delta changes. Together, they give you a complete picture of your risk.

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[ 15 ]Intermediate6 min

Delta Deep Dive

Delta serves double duty. It tells you (1) how much your option moves per $1 stock move, and (2) roughly, the probability that the option expires ITM. A 0.30 Delta call has about a 30% chance of being ITM at expiration.

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[ 16 ]Intermediate5 min

Gamma Deep Dive

Gamma measures how quickly your Delta changes. Near expiration, ATM options have explosive Gamma — small stock moves cause huge swings in the option's value. This is why the last week before expiration can be wild.

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[ 17 ]Intermediate5 min

Vega Deep Dive

Vega tells you how much your option's price changes when implied volatility changes by 1%. If you buy options before a big event and IV spikes, Vega works for you. If IV drops after the event (IV crush), Vega works against you.

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[ 18 ]Intermediate6 min

Buying Power & Collateral

When you sell options, your broker locks up some of your cash as collateral (like a security deposit) to guarantee you can cover potential losses. This is your 'buying power reduction.' The riskier the trade, the more cash is locked up.

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[ 19 ]Intermediate5 min

Stock Risk vs. Option Risk

Owning stock gives you unlimited upside and downside risk to zero. Options let you customize your risk: define it, shape it, limit it on one side, or amplify it with leverage. They're precision tools for managing exposure.

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[ 20 ]Intermediate5 min

Open Interest & Volume

Volume = how many contracts traded today. Open Interest = how many contracts exist right now. High numbers in both mean good liquidity — tighter bid-ask spreads and easier fills. Low numbers mean you might get stuck.

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[ 21 ]Advanced6 min

Early Assignment

If you've sold an American-style option, the buyer can exercise it at any time — not just at expiration. This is called early assignment. It most commonly happens with deep ITM options, especially around ex-dividend dates.

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[ 22 ]Beginner6 min

American-Style Options Basics

Picture two movie tickets that expire in a month. One (American-style) lets you walk in on any day before it expires. The other (European-style) only works for the very last showing. If you sold the flexible ticket, you have to keep a seat ready every single day — you never know when they'll show up. In options, that seat is either the stock you might have to deliver (calls) or the cash you might have to pay (puts). That constant readiness is the heart of early-exercise risk.

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[ 23 ]Beginner5 min

European-Style Options Basics

Picture a hotel reservation that is prepaid and non-refundable until check-in night. You can transfer (sell) the reservation to someone else before that night, but the front desk won't give anyone a room key early — check-in is exactly 4 PM on the reservation date, no exceptions. A European-style option works the same way: the right to receive the payoff activates only at the moment of expiration. No early exercise, no early assignment, and settlement is almost always in cash.

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[ 24 ]Beginner7 min

Common Options Mistakes for Beginners

Trading options is like buying fresh produce instead of canned goods. The apples look bright today, but every hour they sit un-eaten they lose a bit of freshness — some faster than others. Pay too much for fruit that spoils tomorrow and you'll be disappointed even if it tastes fine for a moment. In options terms, the price tag includes time value that rots away (theta), a markup when demand surges (implied volatility), and the risk that one bruised apple ruins the whole grocery budget (position sizing). Treat options like perishables: know the shelf life, don't overpay during a shortage, and never fill the cart with a single untested item.

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[ 25 ]Intermediate6 min

Debit Spreads vs Credit Spreads

Think of two neighboring parking spaces. A debit spread is like renting the prime space for $10 and subletting the less convenient one for $6 — you're out a net $4 and hope demand rises so the price gap widens in your favor. A credit spread reverses the roles: you lease out the prime space for $10 and rent the cheaper one for $6, collecting $4 upfront. You profit if demand stays flat or falls and no one exercises the lease. In options terms, the 'spaces' are strikes, the 'rents' are premiums, and the changing gap between them is the spread's mark-to-market value.

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[ 26 ]Intermediate5 min

How Multi-Leg Orders Work

Think of coordinating a flight with a connecting train. You only want the itinerary if both segments line up — landing in Chicago at 3 PM is useless if the Milwaukee train left at 2:45 PM. A single itinerary that locks in both legs solves the problem. A multi-leg option order works exactly the same way: you tell the broker 'Fill my long call and short call together at a net debit of $2.50, or do nothing.' That one instruction prevents you from being stuck with a lone, unhedged call if the second leg never fills.

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[ 27 ]Beginner5 min

How Payoff Diagrams Work

Think of a payoff diagram like a road map for a road trip. The horizontal mile markers are possible stock prices on expiration day. The vertical elevation markers show your cash position: above sea level is profit, below is loss. Your strategy is the route line — where it climbs you make money, where it dips you lose. Knowing this map lets you decide whether the journey is worth the gas and whether the mountains of risk are too steep before you ever put the car in drive.

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[ 28 ]Intermediate6 min

Triple Witching

Imagine three school buses dropping students at the same narrow doorway at the exact same time. Teachers check attendance, kids search for friends, everyone squeezes through at once — chaos for ten minutes, then normal. Triple witching is that doorway for markets: stock-index options, single-stock equity options, and index derivatives all expire on the same Friday (third Friday of March, June, September, December). Hedgers, market makers, and arbitrage desks all rush to close or roll positions simultaneously. The surge creates unusual volume, wider spreads, and last-minute price swings that can change your P&L or assignment risk.

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[ 29 ]Beginner6 min

Understanding the Options Chain

Think of the options chain as the airport departure board. Each row is a flight (an option contract) with a destination (strike), departure time (expiration), seat availability (open interest), and ticket price (bid/ask). A seasoned traveler scans the board to find the flight that leaves when they want, costs what they're willing to pay, and still has seats. Likewise, an options trader scans the chain to find the contract whose strike, expiration, liquidity, and price best match the trade plan.

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STRATEGIES

44 total
BullishDefined riskBeginner

Long Call

Purchase a call option to gain the right to buy 100 shares at the strike price before expiration. You pay a known premium upfront — that's your maximum loss. Above the breakeven, the call gains intrinsic value dollar-for-dollar with the stock, creating theoretically unlimited upside.

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BearishDefined riskBeginner

Long Put

Purchase a put option to profit from a stock declining below the strike price before expiration. Your maximum loss is the premium paid — fully defined at entry. Profits increase as the stock falls; can double as portfolio insurance on shares you already own.

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BearishUndefined riskAdvanced

Short Call (Naked)

Sell a call option without owning the underlying shares. The premium collected is your maximum profit. If the stock rises above the strike, losses are theoretically unlimited as you may be forced to deliver shares at a far below-market price.

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BullishUndefined riskIntermediate

Short Put (Naked)

Sell a put option to collect premium. Profit if the stock stays above the strike through expiration. If assigned, you must buy 100 shares at the strike price regardless of how far the stock has fallen below it.

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NeutralUndefined riskBeginner

Covered Call

Own 100 shares and sell an OTM call against them. The premium reduces your cost basis and generates income, but above the call strike your shares will be called away. Think of it as 'renting out' the next increment of upside on shares you already hold.

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BullishUndefined riskBeginner

Cash-Secured Put

Sell a put while holding enough cash to buy the shares if assigned. You collect the premium immediately and either keep it as profit (stock stays above strike) or acquire the shares at an effective lower price (strike minus premium). A systematic strategy for buying stocks at a discount.

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BullishDefined riskBeginner

Protective Put

Own 100 shares and buy a put below the current price to set a floor on losses. You keep all upside above the breakeven while the put caps downside below the strike. Think of it as stock insurance — you pay a known premium for guaranteed protection.

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NeutralDefined riskIntermediate

Collar

Protect a stock position by buying a downside put floor and selling an upside call ceiling. The call premium often offsets the put cost entirely, creating a zero-cost or near-zero-cost hedge. Both maximum profit and maximum loss are locked in at entry.

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BearishUndefined riskAdvanced

Covered Put

Short 100 shares and sell a put to collect additional premium. The put is 'covered' by the short stock. Profit is capped when the stock falls to the put strike and you're assigned. The bearish mirror image of a covered call — but with theoretically unlimited upside loss on the short shares.

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NeutralUndefined riskAdvanced

Covered Strangle

Own 100 shares and simultaneously sell both an OTM call and an OTM put. You collect more premium than a standard covered call, but the short put obligates you to buy another 100 shares if the stock falls to the put strike, doubling your downside exposure.

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BullishDefined riskIntermediate

Bull Call Spread

Buy a lower-strike call and sell a higher-strike call in the same expiration. The sold call reduces your cost versus a naked long call but caps your profit at the upper strike. A defined-risk, defined-reward way to express a moderately bullish view.

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BullishDefined riskIntermediate

Bull Put Spread

Sell a higher-strike put and buy a lower-strike put in the same expiration. You collect a net credit upfront — that's your maximum profit. The spread profits as long as the stock remains above the short put strike through expiration.

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BearishDefined riskIntermediate

Bear Call Spread

Sell a lower-strike call and buy a higher-strike call in the same expiration. You collect a credit upfront and keep it if the stock stays below the short call strike through expiration. A defined-risk, defined-reward bearish or neutral income strategy.

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BearishDefined riskIntermediate

Bear Put Spread

Buy a higher-strike put and sell a lower-strike put in the same expiration. You pay a net debit; profits from a moderate decline in the stock. The sold put reduces the cost versus a naked long put but caps your maximum gain.

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NeutralDefined riskAdvanced

Long Call Butterfly

Buy a lower-strike call, sell two middle-strike calls, and buy a higher-strike call — same expiration with equal wing widths. You pay a small debit; maximum profit occurs when the stock pins exactly at the middle strike at expiration. The tent-shaped payoff rewards precise price prediction at minimal cost.

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NeutralDefined riskAdvanced

Long Put Butterfly

Buy a higher-strike put, sell two middle-strike puts, and buy a lower-strike put — same expiration with equal wing widths. Identical payoff to a call butterfly but constructed with puts. Maximum profit occurs when the stock finishes exactly at the middle strike at expiration.

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NeutralDefined riskAdvanced

Iron Butterfly

Sell an at-the-money call and put (a short straddle) and buy OTM options on both sides as protecting wings. The wings limit your maximum loss while the large ATM premium collected funds the trade. The narrow profit zone centered at the strike makes this the highest-premium-per-dollar-of-risk neutral strategy.

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NeutralDefined riskAdvanced

Iron Condor

Sell an OTM put spread and an OTM call spread simultaneously. The four legs create a wider profit zone than an iron butterfly — you collect a credit and keep it as long as the stock stays between both short strikes at expiration. The most popular defined-risk neutral income strategy.

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NeutralDefined riskAdvanced

Long Call Condor

Buy the lowest-strike call, sell the second, sell the third, and buy the highest-strike call — all same expiration. Profits when the stock finishes between the two middle strikes. Offers a wider profit zone than a butterfly at the cost of a slightly larger debit.

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NeutralDefined riskAdvanced

Long Put Condor

The put equivalent of a call condor. Buy the highest-strike put, sell the second-highest, sell the second-lowest, and buy the lowest — all same expiration. Identical payoff to a call condor but built with puts. Profits when the stock finishes between the two middle strikes.

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VolatileDefined riskAdvanced

Long Iron Butterfly

Buy an at-the-money straddle (long call + long put at the same strike) and sell OTM options on both sides as wings. The sold wings reduce the straddle cost and cap maximum profit. Profits from a large move in either direction that pushes the stock beyond one of the outer wings.

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VolatileDefined riskAdvanced

Short Iron Condor

The inverse of the iron condor. Buy OTM put and call spreads simultaneously. Profits when the stock makes a significant move beyond either of the long strikes. Defined risk on both sides — you pay a net debit but cap both gains and losses.

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VolatileDefined riskIntermediate

Long Straddle

Buy a call and put at the same strike and expiration. You profit from a large move in either direction — the combined premium is your maximum loss. Time decay works against you every day, so the stock must move significantly before expiration to overcome the cost of both options.

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NeutralUndefined riskAdvanced

Short Straddle

Sell both an ATM call and put at the same strike and expiration. You collect maximum premium upfront and profit when the stock barely moves. Above or below your breakeven strikes, losses can be severe — upside risk is unlimited, downside risk is substantial.

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VolatileDefined riskIntermediate

Long Strangle

Buy an OTM call and OTM put at different strikes in the same expiration. Cheaper than a straddle since both options are out-of-the-money, but the stock needs an even larger move to cross either breakeven and generate profit.

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NeutralUndefined riskAdvanced

Short Strangle

Sell an OTM call and OTM put at different strikes in the same expiration. The wider profit zone versus a short straddle provides more breathing room, but you collect less premium. Unlimited upside risk, substantial downside risk — you profit as long as the stock stays between the two short strikes.

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NeutralDefined riskIntermediate

Calendar Spread

Sell a short-dated option and buy a longer-dated option at the same strike. The near-term option decays faster, so you profit from the difference in time decay rates. Maximum value is captured when the stock is near the strike at front-month expiration — the back-month option still has value while the front month has expired worthless.

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BullishDefined riskIntermediate

Diagonal Spread

A calendar spread with different strikes. Buy a longer-dated option at one strike and sell a shorter-dated option at a different strike. Combines directional bias with time decay income. The most flexible spread structure for traders who want premium income alongside a directional lean.

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NeutralUndefined riskAdvanced

Short Ratio Call Spread

Buy one lower-strike call and sell two higher-strike calls. Often entered for a credit or zero cost. Profits if the stock rises moderately to the short strikes but stays below the upper breakeven. Above that level, losses accumulate as one short call is naked.

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NeutralUndefined riskAdvanced

Short Ratio Put Spread

Buy one higher-strike put and sell two lower-strike puts. Often entered for a credit. Profits if the stock declines moderately to the short put strikes. Below the lower breakeven, losses mount as one short put is naked.

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BullishDefined riskAdvanced

Long Ratio Call Spread

Sell one lower-strike call and buy two higher-strike calls. Often structured for a small credit or zero cost. Small loss if the stock stays flat (only near the long strike); large profits if the stock makes a significant upside move past both long calls.

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BearishDefined riskAdvanced

Long Ratio Put Spread

Sell one higher-strike put and buy two lower-strike puts. Often structured for a small credit. Limited loss if the stock barely moves; large profits if the stock crashes hard below both long put strikes.

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BullishUndefined riskAdvanced

Synthetic Long Stock

Buy a call and sell a put at the same strike and expiration. Replicates owning 100 shares with near-identical profit and loss behavior but requires far less capital. Above the strike you profit like a stockholder; below it you lose like one — including the obligation to buy shares if the short put is assigned.

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BearishUndefined riskAdvanced

Synthetic Short Stock

Buy a put and sell a call at the same strike and expiration. Replicates short stock exposure without borrowing shares or paying borrow fees. Below the strike you profit like a short seller; above it you lose like one — the short call has unlimited upside risk.

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BullishDefined riskAdvanced

Synthetic Long Call

Own 100 shares and buy a protective put. The combination creates a risk profile identical to a long call — unlimited upside above the breakeven with defined maximum loss below the put strike. This is the economic equivalent of buying a call on the stock.

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BearishDefined riskAdvanced

Synthetic Long Put

Short 100 shares and buy an ATM call option. The combination mimics a long put: you profit as the stock falls while the call caps losses if the stock rises. An alternative bearish structure useful when put premiums are elevated.

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NeutralUndefined riskAdvanced

Jade Lizard

Sell an OTM put and a bear call spread (sell one OTM call, buy a higher-strike call) for a combined credit larger than the call spread width. The structure has no upside risk above the long call strike — only downside risk below the short put. A neutral to slightly bullish premium collection play.

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NeutralUndefined riskAdvanced

Twisted Sister

The bearish mirror of the Jade Lizard. Sell an OTM call and a bull put spread (sell one OTM put, buy a lower-strike put) for a total credit exceeding the put spread width. No downside risk if structured correctly — only upside risk above the short call. Neutral to slightly bearish.

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BullishDefined riskAdvanced

ZEBRA (Zero Extrinsic Back Ratio)

Buy two ATM calls and sell one ITM call. The premium from the ITM call offsets most of the ATM call cost, creating near-zero net extrinsic value. The position behaves like owning 100 shares of stock but with fully defined downside risk — you can't lose more than the small net debit paid.

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BullishUndefined riskAdvanced

Risk Reversal

Sell an OTM put and buy an OTM call in the same expiration. Creates bullish exposure for little or no net premium — the put credit funds the call purchase. Similar to a synthetic long stock but with a gap between the strikes, creating a neutral zone where neither option profits or loses.

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BullishUndefined riskBeginner

Long Stock

Purchase 100 shares of a stock. Profit from price appreciation with no expiration, no time decay, and no complexity. The simplest form of bullish market participation — full economic ownership with unlimited upside and full downside risk to zero.

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BearishUndefined riskIntermediate

Short Stock

Borrow and sell 100 shares expecting to repurchase them at a lower price. Profit from price declines; losses are theoretically unlimited if the stock rises. Requires margin, borrow availability, and willingness to pay interest — plus exposure to short squeezes.

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BullishDefined riskAdvanced

Covered Ratio Spread

A covered ratio spread overlays a 1×2 call structure on 100 shares you already own. By buying one ATM call and selling two OTM calls at a recovery target, it doubles your upside participation between the current price and the short-call strike while capping gains above that level. Net cost is typically zero or a small credit.

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BullishDefined riskIntermediate

Stock Repair Strategy

Stock Repair overlays a zero-cost 1×2 call ratio spread on shares trading below your purchase price. It doubles upside participation between today's price and your original cost basis — cutting the distance to break-even in half — without adding new capital. Downside remains identical to owning the shares.

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