Options Trading for the Institutional Investor: Managing Risk in Financial Institutions

Appendix. Option Trading Strategies

Following is a summary of the strategies presented in this book.

1. Basic long call

a. As a purely speculative position

b. Used to take advantage of price declines in stock

c. As a form of contingent purchase

2. Basic long put

a. As a purely speculative position

b. Used to take advantage of price rise in stock (insurance for paper profits)

c. As a form of contingent sale of stock

3. Basic uncovered call

a. A highly speculative position with unlimited risk

b. As part of a ratio write

4. Basic uncovered put

a. As a form of contingent purchase

b. As part of a rescue strategy

5. Put insurance (buying long puts to ensure current long-stock profits)

6. Contingent-purchase strategies

a. Long calls purchased as an ...