Strategy
Alternative Name
Pre-Requisite Strategy Knowledge
Legs of Trade
Sentiment
Example
- Long 10 XYZ January 50 calls for $1.25, plus fees and commissions
Rule to Remember
Max Potential Profit (GAIN)
Break-Even Point
- The breakeven point occurs when XYZ stock price is trading equal to the strike price plus the net premium paid.
Max Potential Risk (LOSS)
Ideal Outcome
- XYZ price rises significantly above the strike price plus net premium paid
Margin Requirement
Early Assignment Risk
- Early assignment risk applies to short options positions only.
- Long options have no risk of early assignment.
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