Basic Option Trading Strategies
Basic Option Trading Strategies
This Demonstration shows the standard basic trading strategies formed by combinations of European call and put options together with the underlying stock. The net payoff (profit) at expiry is shown as a function of the stock price at expiry (), expressed as a fraction of the initial stock price (). The strategies may be modified by selecting "customize" and playing with the type, quantity, and strike of each component. The stock volatility may also be varied; while for simplicity zero interest rates and dividends and fixed time to expiry are assumed. The vertical dashed lines in the plot correspond to the strike prices of the options.
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