Print this page (Ctrl/Cmd+P) or save as PDF. Short reminders for calls, puts, the ×100 multiplier, and four common structures. Educational only — not financial advice.
| Strategy | Break-even (approx.) | Max profit | Max loss |
|---|---|---|---|
| Long call | Strike + premium | Unlimited | Premium paid |
| Long put | Strike − premium | Strike − premium (to zero) | Premium paid |
| Covered call | Stock cost − premium | (Strike − stock cost) + premium | Stock downside − premium |
| Cash-secured put | Strike − premium | Premium received | Strike − premium (stock risk) |
| Bear put spread | Long put strike − net debit | Width − debit | Net debit |
| Iron condor | Short put − credit / short call + credit | Net credit | Wing width − credit |
Also practice in the Strategy Builder or start at Basics.
Four common strategies — compare the idea, outlook, and risk before opening the full guide.
Own shares and sell a call to collect premium while accepting capped upside.
Learn strategy → Bullish · EntrySell a put with cash ready to buy 100 shares if assigned.
Learn strategy → Neutral · Defined riskUse a four-leg credit structure when you expect price to stay in a range.
Learn strategy → Cycle · IncomeSell CSPs until assigned, then covered calls until the shares are called away.
Learn strategy →A call is the right to buy; a put is the right to sell. Buying buys a right — you choose whether to use it. Selling sells an obligation — you must perform if assigned. That split is the foundation.
Every option price has two parts. Intrinsic value is what the option is worth if exercised right now (only in-the-money options have any). Time value is the rest: the market's price for the chance that things change before expiry. Time value decays to zero — that daily erosion is theta: buyers race the clock while sellers get paid to wait.
Implied volatility (IV) is the market's forecast of future movement, baked into the price. The classic trap: buying just before earnings means buying at peak IV; when the news lands, IV collapses ("IV crush") and the option can lose value even if you called the direction right.
Greeks in one line: Delta — price move per $1 of stock. Gamma — how fast delta changes (highest near expiry). Theta — daily decay. Vega — sensitivity to IV.
Assume XYZ stock is at $50; ignore commissions.
Buy the $55 strike call for $2.00 ($200 out). Break-even at expiry: $57. At $65, the call is worth ($65 − $55) × 100 = $1,000 — an $800 profit. At or below $55, the $200 is gone. Key math: the stock must rise over 14% just to break even — strike and timing matter.
Sell the $45 strike put for $1.50 ($150 in) with $4,500 cash ready. Break-even: $43.50. Above $45 at expiry, you keep the $150 (~3.3% on the cash set aside). If assigned, you buy 100 shares at $45 — effectively $43.50 after premium. Fine if you wanted the stock anyway; painful if it gaps to $30.
Stock at $100: sell the $95 put and $105 call, buy the $90 put and $110 call. Collect $2.00 ($200). Max profit $200 if the stock finishes between $95 and $105. Max loss: $5 wing width − $2 credit = $3.00 ($300). Break-evens: $93 and $107. You risk $300 to make $200 — the win rate must compensate.
One standard US equity contract = 100 shares, so $2.50 = $250. Some index products differ — check the specs.
At expiry: call strike + premium; put strike − premium. Before expiry, leftover time value can put you in profit below that line.
ITM options are usually auto-exercised: a long call becomes 100 long shares (you pay strike × 100); a long put sells your shares or opens a short stock position. OTM options die worthless. Know your broker's cutoff times.
Yes — buy back what you sold or sell what you bought, any time before expiry.
Being short means the buyer can exercise early (common near dividends). Short-put assignment = waking up owning 100 shares; short call = shares called away (or short stock).
No — subtract them from every estimate; they bite hardest on small and multi-leg trades.
Call vs put, long vs short, and the ×100 habit.