neutral strategy COLLAR

Example: Own stock, protect
by purchasing 1 put and selling
1 call with a higher strike
Market Outlook: Neutral
Risk: Limited
Reward: Limited
Increase in Volatility: Effect
varies, none in most cases
Time Erosion: Effect varies
BEP: In principle, breaks even
if, at expiration, the stock is
above/(below) its initial level by
the amount of the debit/(credit)

bear strategy BEAR SPLIT-STRIKE COMBO

Example: Buy 1 put;
sell 1 call at higher strike
Market Outlook: Bearish
Risk: Unlimited
Reward: Limited, but substantial
Increase in Volatility: Neutral
Time Erosion: Neutral
BEP: Two BEPs
1. Short call strike plus
premium received
2. If established at a debit, long
put strike minus premium paid

bear strategy PUT BACKSPREAD

Example: Sell 1 put;
buy 2 puts at lower strike
Market Outlook: Bearish
Risk: Limited
Reward: Limited, but substantial
Increase in Volatility: Typically
helps position
Time Erosion: Typically
hurts position
BEP: Two BEPs
1. Short put strike minus
premium received
2. Long put strike minus
[(difference between long put
strike and short put strike) minus
credit received]

bear strategy BEAR PUT SPREAD

Example: Sell 1 put;
buy 1 put at higher strike
Market Outlook: Bearish
Risk: Limited
Reward: Limited
Increase in Volatility:
Helps or hurts depending on
strikes chosen
Time Erosion: Helps or hurts
depending on strikes chosen
BEP: Long put strike minus
net premium paid

bear strategy LONG PUT

Example: Buy put
Market Outlook: Bearish
Risk: Limited
Reward: Limited, but substantial
Increase in Volatility:
Helps position
Time Erosion: Hurts position
BEP: Strike price minus
premium paid

bull strategy BULL SPLIT-STRIKE COMBO

Example: Buy 1 call;
sell 1 put at lower strike
Market Outlook: Bullish
Risk: Limited, but substantial
Reward: Unlimited
Increase in Volatility: Typically
helps position
Time Erosion: Typically
hurts position
BEP: Two BEPs
1. Long call strike plus premium
paid
2. If established at a credit, short
put strike minus premium
received

bull strategy BULL SPLIT-STRIKE COMBO