Option (finance)

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The strikes do not have to be consecutive and the gaps between them do not need to be equal. Put strike price, Call strike price, and the Underlying price all must be the same.

Option sell put option definition for all the legs should be the same. Buy Put, Sell Call at same strike, Buy underlying enter underlying price. Put strike price, Call strike price, and the Underlying price all must be same.

The strikes do not have to be consecutive and the gaps between them to not need to be equal. The strike price in the far month does not need to equal the strike price in the near month.

This strategy is no longer supported. Although it can still be created as a custom strategy. Put Call Spread vs.

Same as above but sell in trading window. Option expiry for all the legs should be the same Conversion: Sell Call at even higher strike. All series must be sell put option definition same expiry month. Call Strip Buy between three and eight Calls. Put Strip Buy between three and eight Puts. Sell put option definition Put Spread vs. Buy Call, Sell Put at same strike. As above but Sell in trading window.

Sell near month Call, Buy any far month Call at different strike. Sell Put, Buy Put and Call at higher strike. Buy between two and four straddles in one or more expiration months entered as Buy between three and eight Calls.

Buy between three and eight Puts. Sell Call, Buy two Calls at higher strike. Sell Put, Buy two Puts at lower strike.

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Sometimes people have a long put position they own puts and they say they are short. But in fact the security they really own is the put option.

For them to make a profit, the put option must increase in price, so they can sell it for a higher price than for which they have bought it. They are long the put option. When you buy and own a put option, you have a long put position. But being a different thing, your directional bias concerning the underlying is bearish, as the option you own increases in price when the underlying stock falls. When you buy and own a call option, you have a long call position.

Your directional bias concerning the underlying is bullish, as the option you own increases in price when the price of the underlying stock rises. When you sell a call option with the intention to buy it back later for a lower price, you have a short call position.

Your directional bias concerning the underlying stock is bearish, as the underlying stock going down makes the option you want to buy back cheaper, which makes you a profit. When you sell a put option with the intention to buy it back later for a lower price, you have a short put position.

Your directional bias concerning the underlying is bullish, as the underlying stock going up makes the option you want to buy back cheaper, which makes you a profit. Of the four basic option positions, long call and short put are bullish trades, while long put and short call are bearish trades.

Whenever you buy and own something, you are long. You want the security you have bought to increase in price, so you can sell it later for a higher price and make a profit. Whenever you sell something and hope you will later buy it back for a lower price, you are short. The deciding factor for the long vs. It is useful to get familiar with the right terminology as early as possible. Assuming that you want to learn as much about options as possible in order to become competitive and survive in the markets, you will probably encounter other materials and books about options.

Knowing what all the basic terms mean will be necessary for you to understand what it is all about. For example, when dealing with option spreads and more complicated combinations of option positions, you will see terms like bull call spread , bear call spread , or bull put spread , which all sound similar, but as you might expect they have significant differences critical for your profit and loss.

You might even get to a situation when your online trading platform breaks down and you will have to call your broker in order to quickly close or adjust some of your positions. In such cases, mistakes in communication which might arise from using the wrong terms might cost you a lot of money.

If you don't agree with any part of this Agreement, please leave the website now. All information is for educational purposes only and may be inaccurate, incomplete, outdated or plain wrong. Macroption is not liable for any damages resulting from using the content. No financial, investment or trading advice is given at any time.

Home Calculators Tutorials About Contact. Tutorial 1 Tutorial 2 Tutorial 3 Tutorial 4. Terminology of Option Positions.