Options Strategies

Every strategy in this library falls into one of two families. A defined risk trade has a worst case you can write down before entering: the premium paid for a long option, or the width of a spread minus the credit received. Long calls, bull call spreads, and iron condors all belong here. Whatever the market does overnight, the loss cannot exceed that number.

Undefined risk trades, like a short call or a short strangle, collect premium upfront but carry an obligation whose cost can grow without a hard limit. That is why the exchange demands margin from option sellers and adjusts it daily. A single sharp gap against a naked short option can cost many times the premium collected.

The practical rule: learn and trade defined risk structures first. Undefined risk selling has its place for experienced traders with strict position sizing, but the account that survives long enough to get there is usually the one that started with capped losses.

Each card above shows a miniature payoff diagram, and every strategy page carries a full labelled version. The horizontal axis is the price of the underlying at expiry. The vertical axis is your profit or loss per unit. The gold line traces the outcome: wherever it sits above the zero line the trade ends profitable, and wherever it sits below, it ends at a loss.

The line bends at each strike price in the position, so single leg trades look like a hockey stick while four leg structures form plateaus and peaks. The dots on the zero line mark the breakevens, the exact prices where the trade flips from loss to profit. Shaded gold regions are profit zones and muted red regions are loss zones.

Remember that these diagrams show the position at expiry. Before expiration the value of the position also depends on time remaining and implied volatility, so the live mark to market will differ from the expiry line. Each strategy page explains how those two forces move the trade.