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The Bible of Options Strategies: The Definitive Guide for Practical Trading Strategies by Guy Cohen

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Chapter 1. The Four Basic Options Strategies

Introduction

The easiest way to learn options is with pictures so that you can begin to piece together strategies step-by-step. However, first we need to understand the four basic strategies. From that point, logic kicks in, and our learning can progress exponentially.

A risk profile chart shows us our profit/loss position for each trade. It differs from a standard price/time chart that we're used to seeing to monitor stock prices.

There are four easy steps to creating a risk profile chart:

Step 1. Y axis for profit/loss position

Image

Step 2. X axis for underlying asset price range

Step 3. Breakeven ...

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