The StrategyA long put gives you the right to sell the underlying stock at strike price A. If there were no such thing as puts, the only way to benefit from a downward movement in the market would be to sell stock short. Too often, traders jump into the options game with little or no understanding of how many options strategies are available to limit their risk and maximize return.
With a little bit of effort, however, traders can learn how to take advantage of the flexibility and full power of options as a trading vehicle. DescriptionAn investor writes a call option and buys a put option with the same expiration as a means to hedge a long position in the underlying options strategies long call short put strategies. This strategy combines two other hedging strategies: protective puts and covered call writing.Usually, the investor will select a call strike above and a long put strike below the starting stock price.
There is latitude, but the strike choices will affect the cost of the hedge as well as the protection it provides. The long call synthetic straddle recreates the long straddlestrategy by shortingthe underlying stock and buying enoughat-the-money calls to cover twice the numberof shares shorted. That is, for every 100 shares shorted, 2 calls must be bought.Long Call Synthetic Straddle ConstructionBuy 2 ATM CallsShort 100 SharesLong call syntheticstraddles are unlimited profit, limited risk options trading strategies that areused whenthe options trader feels that the underlying assetprice will experience significantvolatility in the near term.
A bear call spread is a limited-risk-limited-reward strategy, consisting of one short call option and one long call option. This strategy generally profits if the stock price holds steady or declines.The most it can generate is the net premium received at the outset. If the forecast is wrong and the stock rallies instead, the losses grow only until long call caps the amount.
Options strategies long call short put strategies