TickersAnalysis
Options Strategies Playbook

Options Strategy Framework

Income Directional Volatility Protection Time Decay

Learn, compare, and select options strategies based on market outlook, risk appetite, and trading objective.

How to Use This Playbook

Each card shows the core idea, when to use it, a simple example, and key risks. Use this as a quick decision layer on top of your own research and risk controls.

A. Income Strategies (Low / Moderate Risk)
Designed to collect option premiums in sideways or mildly trending markets. Focused on steady returns with defined risk.
Covered Call
Low Risk
Objective: Income Outlook: Sideways / Mild Bullish Requires Stock Ownership

Sell a call option against stock you already own. You generate premium income but cap your upside above the strike price.

Mechanics
  • Long 100+ shares of the stock.
  • Sell 1 call per 100 shares at or above current price.
  • Collect premium; shares may be called away if price rises.
Example
You own 100 shares of AAPL at $180. Sell a 1-month $190 call for $3.
If AAPL < $190 at expiry → keep shares + $300 premium. If AAPL >= $190 → shares sold at $190; you lock in stock gains + $300 premium, but miss further upside.
Best for long-term holders who want extra yield on quality names.
Cash-Secured Put
Low / Mod
Objective: Income + Entry at Discount Outlook: Neutral / Mild Bullish Cash Reserved for Assignment

Sell a put with enough cash reserved to buy the stock if assigned. You get paid to potentially buy the stock at a lower effective price.

Mechanics
  • Choose a stock you want to own long term.
  • Sell a put at a strike price where you'd be happy to buy.
  • Keep cash equal to strike × 100 shares.
Example
TSLA trades at $250. Sell a $230 put for $5.
If TSLA stays above $230 → keep $500 premium. If TSLA falls below $230 → you buy at $230; effective cost = $225 after premium.
Suitable as a disciplined way to accumulate positions during dips.
Iron Condor
Moderate Risk
Objective: Income Outlook: Range-Bound / Low Volatility Limited Risk, Limited Reward

Combine a short call spread and a short put spread to collect premium when price stays within a defined range.

Mechanics
  • Sell an OTM call and buy a further OTM call (call spread).
  • Sell an OTM put and buy a further OTM put (put spread).
  • Profit if the stock expires between the short strike prices.
Example
GOOGL at $140: • Sell 150C / Buy 155C • Sell 130P / Buy 125P Net premium = $3.
If GOOGL stays between $130 and $150 → you keep most or all of the $3 premium. Loss is capped if price moves outside the wings.
Works best on indexes or liquid ETFs when you expect calm markets.
B. Directional Strategies (Bullish & Bearish)
Express a view on direction: bullish, bearish, or moderately trending. Focus on upside/downside with defined risk.

Bullish

Long Call
High Risk
Objective: Leverage Upside Outlook: Strong Bullish Max Loss = Premium

Buy a call to gain leveraged exposure to upside moves with a limited upfront cost. Time decay works against you.

Mechanics
  • Choose strike slightly OTM or ATM for better delta.
  • Select an expiry far enough to allow the move.
  • Risk is the entire premium if stock does not move up.
Example
AMZN at $145. Buy a $150 call for $2.
If AMZN rallies to $165, call is worth ≈ $15 → profit ≈ $13. If price stays below $150, option may expire worthless.
Bull Call Spread
Moderate Risk
Objective: Cheaper Bullish Bet Outlook: Moderate Bullish Defined Risk & Reward

Buy a call at a lower strike and sell a call at a higher strike to reduce cost while capping upside.

Mechanics
  • Buy ATM / slightly ITM call.
  • Sell OTM call to reduce net premium.
  • Max profit occurs if price ≥ short call at expiry.
Example
NVDA at $460. Buy $450 call at $12, sell $480 call at $6 → net debit = $6.
Max profit = ($480 − $450) − $6 = $24 per share if NVDA ≥ $480 at expiry. Max loss limited to the $6 paid.
Covered Call (Mild Bullish)
Low Risk
Objective: Income + Mild Upside Outlook: Sideways / Mild Bullish Stock Required

When you are modestly bullish or neutral, covered calls convert long stock into a yield-generating position with limited extra upside.

Key Idea
  • Use on stable, large-cap names.
  • Choose strike above current price to allow some upside.
  • Roll calls as they get close to expiry if you want to keep stock.

Bearish

Long Put
High Risk
Objective: Profit from Decline Outlook: Strong Bearish Max Loss = Premium

Buy a put to profit from sharp downside moves or hedge an existing position with simple, direct protection.

Mechanics
  • Choose strike around or slightly above current price.
  • Pick expiry long enough for your thesis to play out.
  • Upside capped at price dropping to near zero; loss = premium.
Example
SPY at 500. Buy 480 put for $3.
If SPY falls to 460, put ≈ $20 → profit ≈ $17. If SPY stays above 480, option may expire worthless.
Bear Put Spread
Moderate Risk
Objective: Cheaper Bearish Bet Outlook: Moderate Bearish Defined Risk & Reward

Buy a higher-strike put and sell a lower-strike put. This reduces cost but caps maximum profit.

Mechanics
  • Buy put just above current price.
  • Sell put further below to offset premium.
  • Max profit if price is at or below lower strike at expiry.
Example
META at $330. Buy $340 put at $8, sell $310 put at $4 → net debit = $4.
Max profit = ($340 − $310) − $4 = $26 if META ≤ $310 at expiry. Max loss is limited to $4.
C. Volatility Strategies (High Risk)
Bet on movement itself, not direction. Require careful position sizing and event awareness.
Long Straddle
High Risk
Objective: Capture Big Move Outlook: High Volatility Direction: Unknown

Buy a call and a put at the same strike and expiry to profit from large moves in either direction.

Mechanics
  • Use ATM strike near current price.
  • Total cost = call premium + put premium.
  • Needs a move larger than total premium to be profitable.
Example
AMZN at $145. Buy 145 call for $5 and 145 put for $5 → total cost = $10.
If AMZN moves to $165 or $125, one leg gains big value. You profit if total intrinsic value > $10 cost.
Long Strangle
High Risk
Objective: Cheaper Volatility Bet Outlook: Very High Volatility OTM Options

Buy an OTM call and OTM put. Cheaper than a straddle but requires a larger move to profit.

Mechanics
  • Call strike above current price, put strike below.
  • Risk is total premium of both options.
  • Good for earnings surprises or macro events.
Example
AMZN at $145. Buy 150 call for $3 and 140 put for $3 → total cost = $6.
Requires a significant move beyond 150+6 or 140−6 to achieve meaningful profit.
Iron Butterfly
High Risk
Objective: Income from Pinning Outlook: Price Holds Near Strike Defined Risk

A tighter version of the iron condor centered at one strike. Collects more premium but is more sensitive to movement.

Mechanics
  • Sell ATM call and ATM put (short straddle).
  • Buy OTM call and OTM put for protection (wings).
  • Profit if stock stays near the central strike at expiry.
Example
AAPL at $180: • Sell 180C and 180P • Buy 190C and 170P.
Max profit near $180. Losses limited beyond 190 or below 170. Avoid into major earnings surprises.
D. Protection Strategies (Hedging)
Designed to limit downside while allowing some upside. Often used around earnings, macro risk, or late-cycle environments.
Protective Put
Moderate Risk
Objective: Portfolio Insurance Outlook: Bullish but Worried Long Stock + Long Put

Buy a put under your existing long stock to define the worst-case downside. Functions like an insurance policy.

Mechanics
  • Own stock you want to protect.
  • Buy an OTM put as a floor.
  • Premium paid reduces net return but limits drawdowns.
Example
Own MSFT at $400. Buy a $380 put for $4.
If MSFT crashes to $350, you can still sell at $380. Max loss ≈ $24 per share (plus put cost) instead of unlimited downside.
Collar
Moderate Risk
Objective: Low-Cost Hedge Outlook: Neutral / Mild Bullish Stock + Put + Short Call

Combine a protective put with a covered call. Call premium helps fund the cost of the put, creating a defined price corridor.

Mechanics
  • Own the stock.
  • Buy OTM put below current price.
  • Sell OTM call above current price to offset put cost.
Example
Own AAPL at $180. Buy $170 put, sell $195 call.
Downside limited below $170; upside capped above $195. Good for locking in gains with limited cost.
Put Spreads (Protective)
Moderate Risk
Objective: Cheaper Protection Outlook: Moderate Downside Risk Spread-Based Hedge

Use a vertical put spread as a lower-cost hedge instead of a single put, accepting a limited protection range.

Mechanics
  • Buy put near current price (protection leg).
  • Sell lower-strike put to reduce cost.
  • Max hedge applies only between those strikes.
Example
Stock at $100. Buy $95 put, sell $85 put.
You are protected between $95 and $85. Below $85, losses resume as if unhedged, but cost is lower than a lone $95 put.
E. Advanced Time-Based Strategies
Use differences in time decay and volatility across expiries. More advanced, best for experienced options traders.
Calendar Spread
Moderate Risk
Objective: Benefit from Time Decay Outlook: Sideways / Mean Reversion Short Near-Term, Long Longer-Term

Sell a short-term option and buy a longer-term option at the same strike. Profit from faster decay in the short option plus possible volatility changes.

Mechanics
  • Choose a central strike where you expect price to hover.
  • Sell near-term option at that strike.
  • Buy longer-term option at same strike.
Example
Stock at $150: Sell 1-month 150 call for $4, buy 3-month 150 call for $7.
Near-term call decays faster. If stock stays near $150, the short call loses value quickly, improving your position.
Diagonal Spread
Moderate / Advanced
Objective: Time Decay + Direction Outlook: Mild Trend (Bull/Bear) Different Strikes & Expiries

A hybrid of vertical and calendar spreads. You buy a longer-dated option and sell a shorter-dated option at a different strike to add directional bias.

Mechanics
  • Pick direction (bullish or bearish).
  • Buy a longer-dated option closer to where you expect price to be.
  • Sell a nearer-term option at a different strike to harvest decay.
Example (Bullish)
Stock at $150: Buy 3-month 160 call, sell 1-month 150 call.
You earn from short-term decay while positioning for a gentle move higher. Risk and payoff are more complex than basic spreads.