OPT2 Options Strategies

A share and calls and puts at three strikes trade together. Strategies are built from the options.

Objective

Build a position from the options that pays off on a view. Assessed on profit and loss.

What it shows

• Option strategies: spreads, straddles, strangles and butterflies.
• How the strikes combine into payoffs with different shapes.
• The cost of a strategy against what it pays in each outcome.

Watch out for

• Building a strategy with a payoff that does not match the view.
• Legs of a spread traded one at a time, with the price moving between them.
• Seven securities and a class that has not all looked at the same strikes.

Who takes part

• Trader — every student. Trades SHARE and calls and puts at 45, 50 and 55.

Class size

Ten to forty students in one role. Seven securities are priced by the class, so twenty or more keeps each active.