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The table below summarizes some of the key differences between stocks and options. Characteristic. Stocks. Options. Potential upside. High. Very high (and quickly) Risk. High. Very high. Lifetime.
Call options: A call option lets you buy the stock by a certain date at a specific price. Investors who buy call options usually expect the price of the stock to increase so that they can buy it ...
In finance, a calendar spread (also called a time spread or horizontal spread) is a spread trade involving the simultaneous purchase of futures or options expiring on a particular date and the sale of the same instrument expiring on another date. These individual purchases, known as the legs of the spread, vary only in expiration date; they are ...
Call options rise in price when the underlying stock rises in price, and this basic option strategy gives the call owner the ability to profit with unlimited upside for the duration of the option ...
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A long butterfly options strategy consists of the following options: Long 1 call with a strike price of (X − a) Short 2 calls with a strike price of X; Long 1 call with a strike price of (X + a) where X = the spot price (i.e. current market price of underlying) and a > 0. Using put–call parity a long butterfly can also be created as follows:
For example, a bull spread constructed from calls (e.g., long a 50 call, short a 60 call) combined with a bear spread constructed from puts (e.g., long a 60 put, short a 50 put) has a constant payoff of the difference in exercise prices (e.g. 10) assuming that the underlying stock does not go ex-dividend before the expiration of the options.
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