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Understanding Calls and Puts.pdf
The document provides an overview of options education content that will be covered across three levels - essential, seasoned, and master. The essential level will cover basic options concepts like calls and puts, pricing, and strategies like the wheel. The seasoned level delves into more advanced topics such as calendars, diagonals, and understanding the Greeks. Finally, the master level covers complex multi-legged strategies and other advanced Greeks. The goal is to build a foundation of options knowledge starting with single-legged strategies and basic concepts, then progressing to more sophisticated strategies and risk management techniques. Completing all three levels will provide a comprehensive options education.
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Understanding Calls and Puts.pdf
- 1. Get Started withOptions Understanding Calls & Puts MAR 24 4:15 PM EST Tony Zhang, Chief Strategy Officer Jessica Inskip, Director of Education & Product
- 2. Jessica Inskip Director ofEducation & Product Meet our newest team member! Jessica Inskip is an advanced product specialist within the self-directed investing space. Jessica is currently the Director of Education and Product for OptionsPlay. Jessica joined the financial industry in 2009 and most recently accepted a position with OptionsPlay. She has held various positions within the brokerage industry across multiple firms, including roles specializing in strategy, product management, high frequency trading, complex options and derivative strategies, and the relationship management of high-net-worth affluent investors. Ultimately, Jessica's passion is in creating education and making it accessible to all
- 3. MASTER Options Education What toexpect ESSENTIAL Options Education Options Pricing Understanding Calls & Puts The Wheel Strategy Exercise & Assignment Understanding the Greeks Implied Volatility | Earnings Debit Spreads Credit Spreads SEASONED Options Education Calendars & Diagonals Strangles & Straddles Condor & Butterflies The Greeks & Multi-legs Hedging a Portfolio The Other Greeks Index Options Build an essential foundation of options concepts that will prepare you for mastery You will learn the ins and outs of single-legged options Level up with advanced concepts like the Greeks and implied volatility to confidently trade You will learn the ins and outs of two-legged option strategies Become an options master and even learn how the other Greeks work You will learn the ins and outs of four-legged option strategies
- 4. Types of securities,forms and research tools used in this video are for demonstration purposes only and should not be considered a recommendation by OptionsPlay or a solicitation or an offer to buy or sell any securities. This video is not intended to be used for individual tax, legal or investment planning advice Important Disclaimer
- 5. Agenda w w w . o p t i o n s p l a y. c o m Review of calls& puts basics Long & short equity calls Long & short equity puts Putting it all together Q&A Review of an options chain
- 6. CALLS PUTS Long Calls Purchasedfor a premium Own right to buy Short Puts Sold for a premium Obligated to buy Short Calls Sold for a premium Obligated to sell Long Puts Purchased for a premium Own right to sell
- 7. Calls are on theleft
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- 9. The strike priceis in the middle
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- 16. Open Int: amount of contractsin existence
- 18. OptionsPlay scans the optionchain for you providing optimal trade ideas
- 19. 1 expiring onApril 22 at strike of $150 Buy to open AAPL CALL for $7 Owns the right to buy 100 shares of AAPL for $150/ per share at anytime up until April 22nd in exchange for a debit of $7 ($700 total) $(800.00) $(600.00) $(400.00) $(200.00) $- $200.00 $400.00 $600.00 $800.00 $1,000.00 $145.00 $150.00 $155.00 $160.00 $165.00 1 2 3 Strike Price Unlimited gain potential $157 AAPL needs to move more than the extrinsic value purchased Gains begin above $157 $150 Breakeven Price @ Exp 1 Max loss occurs when stock is at or below the strike at expiration (premium paid) STOCK @ $150 OR LOWER MAX RISK 2 When stock moves above strike plus premium paid STOCK @ $157 BREAKEVEN 3 Unlimited gain potential when stock moves above breakeven STOCK ABOVE $157 MAX GAIN Long Equity Calls
- 20. $(1,000.00) $(800.00) $(600.00) $(400.00) $(200.00) $- $200.00 $400.00 $600.00 $800.00 $145.00 $150.00 $155.00$160.00 $165.00 1 expiring on April 22 at strike of $150 Sell to open AAPL CALL for $7 Obligated to sell 100 shares of AAPL for $150/ per share at the buyer’s discretion at anytime up until April 22nd in exchange for a credit of $7 ($700 total) 1 2 3 Strike Price Limited gain potential $157 AAPL needs to remain at strike or move lower $150 Breakeven Price @ Exp 1 Max loss is unlimited, losses begin when stock is above $157 STOCK ABOVE $157 MAX RISK 2 When stock moves above strike plus premium paid STOCK @ $157 BREAKEVEN 3 Limited gain potential when stock remains at strike or moves lower (premium received) STOCK @ $150 OR LOWER MAX GAIN Short Equity Calls Unlimited loss potential Losses begin above $157
- 21. 1 expiring onApril 22 at strike of $150 AAPL CALL for $7 Equity Calls Expiration Day $140 $145 $150 $155 $160 $165 $170 $175 $180 $185 $150 Trade Placed $157 Breakeven 30 day timeframe to be profitable Strike Price LONG CALL PURCHASER SHORT CALL WRITER AAPL @ $150, Trade Placed Buy to open 1 AAPL $150 April 22 Call @ $7 Sell to open 1 AAPL $150 April 22 Call @ $7 Premium Received: + $7 ($700 total) Bullish $165 price target 30 day timeframe Neutral - Bearish $150 price target 30 day timeframe Premium Paid: - $7 ($700 total)
- 22. 1 expiring onApril 22 at strike of $150 AAPL CALL for $17 Equity Calls Expiration Day $140 $145 $150 $155 $160 $165 $170 $175 $180 $185 $150 Trade Placed $157 Breakeven 30 day timeframe to be profitable Strike Price LONG CALL PURCHASER SHORT CALL WRITER AAPL @ $150, Trade Placed Buy to open 1 AAPL $150 April 22 Call @ $7 Sell to open 1 AAPL $150 April 22 Call @ $7 Premium Received: + $7 ($700 total) Bullish $165 price target 30 day timeframe Neutral - Bearish $150 price target 30 day timeframe Premium Paid: - $7 ($700 total) Day 15 AAPL @ $165, Trade Placed Sell to close 1 AAPL $150 April 22 Call @ $17 Premium Received: + $17 ($1700 total) GAIN of $10 per share ($1000 total) Buy to close 1 AAPL $150 April 22 Call @ $17 Premium Paid: - $17 ($1700 total) LOSS of $10 per share ($1000 total)
- 23. 1 expiring onApril 22 at strike of $150 AAPL CALL for $16 Equity Calls Expiration Day $140 $145 $150 $155 $160 $165 $170 $175 $180 $185 $150 Trade Placed $157 Breakeven 30 day timeframe to be profitable Strike Price LONG CALL PURCHASER SHORT CALL WRITER AAPL @ $150, Trade Placed Buy to open 1 AAPL $150 April 22 Call @ $7 Sell to open 1 AAPL $150 April 22 Call @ $7 Premium Received: + $7 ($700 total) Bullish $165 price target 30 day timeframe Neutral - Bearish $150 price target 30 day timeframe Premium Paid: - $7 ($700 total) AAPL @ $166, Trade Placed Sell to close 1 AAPL $150 April 22 Call @ $16 Premium Received: + $16 ($1600 total) GAIN of $9 per share ($900 total) Buy to close 1 AAPL $150 April 22 Call @ $16 Premium Paid: - $16 ($1600 total) LOSS of $9 per share ($900 total)
- 24. 1 expiring onApril 22 at strike of $150 AAPL CALL for $5 Equity Calls Expiration Day $140 $145 $150 $155 $160 $165 $170 $175 $180 $185 $150 Trade Placed $157 Breakeven 30 day timeframe to be profitable Strike Price LONG CALL PURCHASER SHORT CALL WRITER AAPL @ $150, Trade Placed Buy to open 1 AAPL $150 April 22 Call @ $7 Sell to open 1 AAPL $150 April 22 Call @ $7 Premium Received: + $7 ($700 total) Bullish $165 price target 30 day timeframe Neutral - Bearish $150 price target 30 day timeframe Premium Paid: - $7 ($700 total) AAPL @ $150, Trade Placed Sell to close 1 AAPL $150 April 22 Call @ $5 Premium Received: + $5 ($500 total) GAIN of $2 per share ($200 total) Buy to close 1 AAPL $150 April 22 Call @ $5 Premium Paid: - $5 ($500 total) LOSS of $2 per share ($200 total) Day 15
- 25. 1 expiring onApril 22 at strike of $150 AAPL CALL for $0 Equity Calls Expiration Day $140 $145 $150 $155 $160 $165 $170 $175 $180 $185 $150 Trade Placed $157 Breakeven 30 day timeframe to be profitable Strike Price LONG CALL PURCHASER SHORT CALL WRITER AAPL @ $150, Trade Placed Buy to open 1 AAPL $150 April 22 Call @ $7 Sell to open 1 AAPL $150 April 22 Call @ $7 Premium Received: + $7 ($700 total) Bullish $165 price target 30 day timeframe Neutral - Bearish $150 price target 30 day timeframe Premium Paid: - $7 ($700 total) AAPL @ $145, Trade Placed Cannot close option Expires Worthless GAIN of $7 per share ($700 total) Cannot close option Expires Worthless LOSS of $7 per share ($700 total)
- 26. $(800.00) $(600.00) $(400.00) $(200.00) $- $200.00 $400.00 $600.00 $800.00 $1,000.00 $135.00 $140.00 $145.00$150.00 $155.00 1 expiring on April 22 at strike of $150 Buy to open AAPL PUT for $7 Owns the right to sell 100 shares of AAPL for $150/ per share at anytime up until April 22nd in exchange for a debit of $7 ($700 total) 2 3 Strike Price Substantial gain potential $143 Gains begin below $143 $150 Breakeven Price @ Exp 1 Max loss occurs when stock is at or above the strike at expiration (premium paid) STOCK @ $150 OR HIGHER MAX RISK 2 When stock moves below strike minus premium paid STOCK @ $143 BREAKEVEN 3 Substantial gain potential when stock moves below breakeven STOCK BELOW $143 MAX GAIN Long Equity Puts 1 AAPL needs to move more than extrinsic value purchased
- 27. $(1,000.00) $(800.00) $(600.00) $(400.00) $(200.00) $- $200.00 $400.00 $600.00 $800.00 $135.00 $140.00 $145.00$150.00 $155.00 1 expiring on April 22 at strike of $150 Sell to open AAPL PUT for $7 Obligated to purchase 100 shares of AAPL for $150/ per share at the buyer’s discretion at anytime up until April 22nd in exchange for a credit of $7 ($700 total) 2 Strike Price Substantial loss potential $143 Losses begin below $143 $150 Breakeven Price @ Exp 1 Loss begins when stock is at or below the breakeven, max loss occurs if the stock reaches $0 STOCK BELOW $143 MAX RISK 2 When stock moves below strike minus premium paid STOCK @ $143 BREAKEVEN 3 Limited gain potential when stock moves above breakeven (premium received) STOCK @ $150 OR HIGHER MAX GAIN Short Equity Puts 1 AAPL needs to remain at strike or move higher 3
- 28. 1 expiring onApril 22 at strike of $150 AAPL PUT for $7 Equity Puts Expiration Day $125 $130 $135 $140 $145 $150 $155 $160 $165 $170 $150 Trade Placed $143 Breakeven 30 day timeframe to be profitable Strike Price LONG PUT PURCHASER SHORT PUT WRITER AAPL @ $150, Trade Placed Buy to open 1 AAPL $150 April 22 Put @ $7 Sell to open 1 AAPL $150 April 22 Put @ $7 Premium Received: + $7 ($700 total) Bearish $135 price target 30 day timeframe Neutral - Bullish $155 price target 30 day timeframe Premium Paid: - $7 ($700 total)
- 29. 1 expiring onApril 22 at strike of $150 AAPL PUT for $7 Equity Puts Expiration Day $125 $130 $135 $140 $145 $150 $155 $160 $165 $170 $150 Trade Placed $143 Breakeven 30 day timeframe to be profitable Strike Price LONG PUT PURCHASER SHORT PUT WRITER AAPL @ $150, Trade Placed Buy to open 1 AAPL $150 April 22 Put @ $7 Sell to open 1 AAPL $150 April 22 Put @ $7 Premium Received: + $7 ($700 total) Bearish $135 price target 30 day timeframe Neutral - Bullish $155 price target 30 day timeframe Premium Paid: - $7 ($700 total) AAPL @ $140, Trade Placed Sell to close 1 AAPL $150 April 22 Call @ $11 GAIN of $4 per share ($400 total) Buy to close 1 AAPL $150 April 22 Call @ $11 LOSS of $4 per share ($400 total) Day 15 Premium Received: + $11 ($1100 total) Premium Paid: - $11 ($1100 total)
- 30. 1 expiring onApril 22 at strike of $150 AAPL PUT for $7 Equity Puts Expiration Day $125 $130 $135 $140 $145 $150 $155 $160 $165 $170 $150 Trade Placed $143 Breakeven 30 day timeframe to be profitable Strike Price LONG PUT PURCHASER SHORT PUT WRITER AAPL @ $150, Trade Placed Buy to open 1 AAPL $150 April 22 Put @ $7 Sell to open 1 AAPL $150 April 22 Put @ $7 Premium Received: + $7 ($700 total) Bearish $135 price target 30 day timeframe Neutral - Bullish $155 price target 30 day timeframe Premium Paid: - $7 ($700 total) AAPL @ $135, Trade Placed Sell to close 1 AAPL $150 April 22 Call @ $15 GAIN of $8 per share ($800 total) Buy to close 1 AAPL $150 April 22 Call @ $15 LOSS of $8 per share ($800 total) Premium Received: + $15 ($1100 total) Premium Paid: - $15 ($1100 total)
- 31. 1 expiring onApril 22 at strike of $150 AAPL PUT for $9 Equity Puts Expiration Day $125 $130 $135 $140 $145 $150 $155 $160 $165 $170 $150 Trade Placed $143 Breakeven 30 day timeframe to be profitable Strike Price LONG PUT PURCHASER SHORT PUT WRITER AAPL @ $150, Trade Placed Buy to open 1 AAPL $150 April 22 Put @ $7 Sell to open 1 AAPL $150 April 22 Put @ $7 Premium Received: + $7 ($700 total) Bearish $135 price target 30 day timeframe Neutral - Bullish $155 price target 30 day timeframe Premium Paid: - $7 ($700 total) AAPL @ $143, Trade Placed Sell to close 1 AAPL $150 April 22 Call @ $9 GAIN of $2 per share ($200 total) Buy to close 1 AAPL $150 April 22 Call @ $9 LOSS of $2 per share ($200 total) Day 15 Premium Received: + $9 ($900 total) Premium Paid: - $9 ($900 total)
- 32. 1 expiring onApril 22 at strike of $150 AAPL PUT for $7 Equity Puts Expiration Day $125 $130 $135 $140 $145 $150 $155 $160 $165 $170 $150 Trade Placed $143 Breakeven 30 day timeframe to be profitable Strike Price LONG PUT PURCHASER SHORT PUT WRITER AAPL @ $150, Trade Placed Buy to open 1 AAPL $150 April 22 Put @ $7 Sell to open 1 AAPL $150 April 22 Put @ $7 Premium Received: + $7 ($700 total) Bearish $135 price target 30 day timeframe Neutral - Bullish $155 price target 30 day timeframe Premium Paid: - $7 ($700 total) AAPL @ $143, Trade Placed Sell to close 1 AAPL $150 April 22 Call @ $7 BREAKEVEN Buy to close 1 AAPL $150 April 22 Call @ $7 Premium Received: + $7 ($700 total) Premium Paid: - $7 ($700 total) BREAKEVEN
- 33. 1 expiring onApril 22 at strike of $150 AAPL PUT for $0 Equity Puts Expiration Day $125 $130 $135 $140 $145 $150 $155 $160 $165 $170 $150 Trade Placed $143 Breakeven 30 day timeframe to be profitable Strike Price LONG PUT PURCHASER SHORT PUT WRITER AAPL @ $150, Trade Placed Buy to open 1 AAPL $150 April 22 Put @ $7 Sell to open 1 AAPL $150 April 22 Put @ $7 Premium Received: + $7 ($700 total) Bearish $135 price target 30 day timeframe Neutral - Bullish $155 price target 30 day timeframe Premium Paid: - $7 ($700 total) AAPL @ $154, Trade Placed Cannot close option GAIN of $7 per share ($700 total) Cannot close option LOSS of $7 per share ($700 total) Expires Worthless Expires Worthless
- 34. Sold for apremium Obligated to buy underlying Time decay is positive Profits from neutral & upward movement CALLS Short Puts Long Calls PUTS Option expires and keep maximum credit GOAL Purchased for a premium Right to buy underlying Time decay is negative Profits from sharp upward movement Long Calls Stock rallies more than premium paid GOAL Long Calls Purchased for a premium Right to sell underlying Time decay is negative Profits from sharp downward movement Long Puts Stock declines more than premium paid GOAL Sold for a premium Obligated to sell underlying Time decay is positive Profits from neutral & downward movement Short Calls Option expires and keep maximum credit GOAL
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- 36. Signals Daily Entry &Exit signals from Options Research Team Trade Free 30-day Trial – Opportunity Reports & Intuitive Tools Learn Weekly Options Education & Market Outlook Sessions 1 2 3 www.optionsplay.com