Chapter 12 preview
Chapter 12: Options
Chapter 12 covers options. Know the four basic positions (long call, short call, long put, short put), their maximum gain, maximum loss, and breakeven. Build from there to strategies: covered calls limit upside, protective puts create a floor, straddles profit from volatility, spreads limit both gain and loss. The exam tests calculation, not just identification — practice working through gain/loss scenarios with sample premiums and strike prices.
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Options
Chapter 12 covers options. Know the four basic positions (long call, short call, long put, short put), their maximum gain, maximum loss, and breakeven. Build from there to strategies: covered calls limit upside, protective puts create a floor, straddles profit from volatility, spreads limit both gain and loss. The exam tests calculation, not just identification — practice working through gain/loss scenarios with sample premiums and strike prices.
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Key concepts
- Overview of Options
- Option Terminology
- Breakeven
- The Options Clearing Corporation
- Option Events
- Formulas for Basic Options Positions
- Multiple Option Strategies
- Spreads
- Butterfly Spreads
- Using Options as a Hedge (Protection)
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