Covered Call

A covered call is when you buy 100 stock and sell 1 call that is above the current price.

Example

• Let's Assume the stock is at $75
• Buy 100 stock for a price of 7,500
• Sell/Write a 85 call for 2.00 with a 30 day expiration.
• After you do this you lose $7,500(from buying stock.)

Scenarios

Scenario 1

• The Stock goes up
• We will use $85 in this example.
• Long Stock
• $1,000 gain
• Short Call
• $200 gain
• As a total
• 1,200 gain
• Max gain since if it goes higher you will have to pay some of your gain for the call.

Scenario 2

• goes down but is above breakeven
• Use 73.50
• Long Stock
• $150 loss
• Short Call
• $200 gain
• As a whole
• $50 gain

Scenario 3

• Goes down under breakeven
• Let's use $67
• Long Stock
• $800 loss
• Short Call
• $200 gain
• As a whole
• $600 loss

Notes

• The breakeven is $73
• {current stock price} - {gain from call}
• This happens since you lose money, but the gain from the call covers you until it is out.

Short Vertical Spread
(Call)

• Buy and write calls

Example

• Currently at $95
• 100 stocks each
• Write/Sell $100 call at 3.00 per share
• Buy $105 call at 1.20 per share

Scenarios

Scenario 1

• Under 100$
• 100$ call-> $300 profit
• 105$ call-> $120 loss
• $180 gain(always same gain)

Scenario 2

• Above $105
• Use $130
• 100$ call-> 2,700 loss
• 105$ call-> 2,380 profit
• $320 loss(always same loss(look below))
• 5.00 - difference between deals
• Beginning gain/loss - 1.80(+3.00 - 1.20)
• 5.00 - 1.80 = 3.20( $320 max loss)

Scenario 3

• Between $100 - $105
• Use Breakeven
• Lower strike price + gain at beginning
• 100.00 + 1.80 = 101.80(above is profit and below is loss)

Long Vertical Spread
(Call)

• Buy and write calls

Example

• Currently at 75.00
• 100 stocks each
• Buy $70 call at 7.50 per share
• Write/sell $80 call at 2.50 per share
• Total cost 500.00(100 stocks)

Scenario 1-4

Scenario 1

• Between both calls
• Use 79.50
• Long 70 call-> $200 gain
• Short 80 call-> $250 gain
• $500 max loss
• $450 gain
• 90% gain
• If only 70 call
• 750 risk
• $200 profit
• 26.67% profit

Scenario 2

• Same price as before
• Long 70 call -> $250 loss
• Short 80 call -> $250 gain
• $500 max loss
• $0 gain
• 0% gain
• If only 70 call
• 750 risk
• $250 loss
• 33% loss

Scenario 3

• Down a lot
• Use $50
• Long 70 call -> $750 loss
• Short 80 call -> $250 gain
• $500 max loss
• $500 loss
• 100% loss
• If only 70 call
• 50 risk
• $750 loss
• 100% loss

Scenario 4

• Up
• Use $85
• Long 70 call-> $750 gain
• Short 80 call-> $250 loss
• $500 max loss
• $500 profit
• 100% gain
• If only 70 call
• 750 risk
• 750 profit
• 100% gain

Notes

• In Long Vertical Spread Max loss and Max gain are $500
• With only prediction unlimited gain but loss can go to $750 at max

Iron Condor

• Sell a OTM call and put
• Buy a OTM call and put(this is more OTM)

Example

• Currently at $75
• 100 stocks(like always)
• Buy 60 put for 1.00 [100.00] loss
• Sell 65 Put for $2.00 [200.00] gain
• Sell 85 call for $2.00 [200.00] gain
• Buy 90 call for $1.00 [100.00] loss
• 30 day expiration

Scenarios

Scenario 1

• Between calls and Puts
• 60 put -> $100 loss
• 65 Put -> $200 gain
• 85 call -> $200 gain
• 90 call -> $100 loss
• $200 gain

Scenario 2

• Up or Down
• Use 96.00
• 60 put -> $100 loss
• 65 Put -> $200 gain
• 85 call -> $900 loss
• 90 call -> $500 gain
• $300 loss(is max loss)

Scenario 3

• The breakeven
• 60 put -> $
• 65 Put -> $
• 85 call -> $
• 90 call -> $