Bullish Limited Risk
all plays

Long call
  • Easy to execute and manage
  • The delta of a call tells you your exposure to changes in the stock
  • The delta of a call will change with stock price movement and the passage of time
  • Don't forget about time decay (negative theta)
  • Keep in mind that volatility of the underlying and fluctuations in implied volatility (supply and demand for premium) affect option prices

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Call Back Spread
  • Long more higher strike calls and short lower strike call at same expiration
  • Like a long call, it has unlimited upside profit potential with limited risk
  • At expiration, the stock needs to be significantly above the long strike to make money
  • This position has net long options, and is usually long volatility (vega)
  • Be aware that a backspread can be initiated for a debit (pay for it) or credit (receive money for it)
  • The potential liability is the difference between the strikes

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Bull Vertical (long call vertical or short put vertical)
  • Long lower strike call (put) and short higher strike call (put) at same expiration
  • The bigger the difference between the strikes, the bigger the potential profit, but also the bigger the cost
  • Your maximum loss and profit are limited
  • Generally speaking, it's an inexpensive way to play the upside in a stock or index
  • It's a good introduction to option spreading, but also a favorite among veterans

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Long Higher Strike Butterfly
  • Relatively inexpensive option strategy that has limited risk and limited profit potential
  • The closer a butterfly is to expiration, the more it will react to changes in the stock price
  • A strategy used by professional traders for years because of its protective characteristics
  • For a long butterfly, you want the stock to rise to the middle strike

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Long Higher Strike Time Spread
  • Long back month option and short front month option at the same strike
  • Time spreads have limited risk and limited profit potential
  • Relatively low cost position with no margin required
  • Be aware that implied volatility can change at different rates in each month
  • This spread works best if the stock moves up to the strike price slowly, allowing the premium of the short call to erode at a quicker rate.

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DOW NYSE S&P Nasdaq
  Name Last Chg %Chg
DOW 30 16,501.65 -12.72 -0.077
NYSE comp 10,581.886 0.00 0.00
S&P 500 1,875.39 0.00 0.00
NASDAQ 4,126.967 -34.491 -0.836