Put

• Option to sell
• Provide short position when exercised
  • Used for hedging
• Increase in value
  • Underlying asset falls in price
  • Volatility of the underlying asset price increases
  • Interest rates decline.
• Lose value
  • Underlying asset increases in price
  • Volatility of the underlying asset price decreases
  • Interest rates rise
  • Time to expiration nears.

From <https://www.investopedia.com/terms/p/putoption.asp>

Cash-Secured Put

• Selling an OTM put and putting aside the money to cover it
  • Neutral to bullish on the underlying asset
  • Hopes for temp downturn in price
• If price goes below strike you will have to buy
  • Probably wanted to, although price might be dipping further

Married/Protective Put

• Buy ATM put while holding
  • Bullish on underlying
  • Evac strategy on ditching underlying at fixed price
  • Concerned about short term fluctuations
• Usually expensive premium
• Similar risk to covered call
• “Synthetic call”

Bear Put

• Long ATM/ITM put + Show a lower OTM put

Call

• Option to buy
• Kind of like a down-payment

Covered Call

• Selling a call option while holding the underlying asset
  • Passive income in premiums on asset
• Doesn’t expect value to change that much
  • Is expecting to hold on to asset
  • If the price rises above strike they’ll have to sell
• Short-term hedge
• “buy-write transaction”
• Rolling
  • Maintaining position at same or altered terms
    • Raise strike
      • If the price has gone up
      • Sell up ITM option
      • And set a new ceiling
    • Lower strike
      • Price has gone down
      • Lower ceiling for better premium
    • Extend out maturity
      • To maintain strategy

Bull Spread

• Long ATM/ITM call + Short a higher OTM call
• Limits losses, caps gains
  • Forfeits gains above strike of short call

Collar Strategy

• Long asset + Long OTM Protective Put + Short OTM Covered Call
• Cap profits to fund evac strategy
• Hedge downside risks but don’t want to sell

Long Straddle

• Long Put + Long Call at same strike/expiration
• Profitable when price moves a lot in either direction
  • Volatile but unsure in which direction
  • Needs to move a lot to cover premiums

Long Strangle

• Long Put + Long Call with spread in strikes
• Similar to straddle

Out of the Money

• No intrinsic value
  • Only extrinsic value
    • The premium
    • Can still make money without going into the money if it approaches it
      • Premium goes up
  • No point exercising, can get a better price on the market
• Higher than current price for CALLS
• Lower than current price for PUTS

Styles

• American
  • Can exercise at any point before expiration
• European
  • Can only exercise at expiration