SIE Key Words

mainly options

Long Call (Holder)

Unlimited Gain, Premium Loss

Short Call (Writer)

Premium Gain, Unlimited Loss

Long Put (Holder)

Strike - Premium Gain, Premium Loss

Short Put (Writer)

Premium Gain, Strike - Premium Loss

Call ITM

Market Price > Strike Price

Call OTM

Market Price < Strike Price

Put ITM

Market Price < Strike Price

Put OTM

Market Price > Strike Price

Long Call; Short Put; Long Stock + Long Put

Bullish

Short Call; Long Put; Short Stock + Long Call; Short Stock + Short Put

Bearish

Long Call Breakeven

Strike + Premium

Short Call Breakeven

Strike + Premium

Short Put Breakeven

Strike - Premium

Long Put Breakeven

Strike - Premium

Long Call/ Short Put (cash/stock)

Deliver cash to receive stock

Short Call/ Long Put (cash/stock)

Deliver stock to receive cash

Bullish

Expectation of rising values

Bearish

Expectation of falling values

Long

buy the option

Short

sell the option

Call

buy stock at strike

Put

Sell stock at strike

Hedging Strategies

1) Long Stock + Long Put

2) Short Stock + Long Call

Income Strategies

1) Covered Call (Long Stock + Short Call)

2) Covered Put (Short Stock + Short Put)

Covered Call Strategies

Bullish/Neutral

Long Stock + Long Put Breakeven

Stock Purchase + Premium

Short Stock + Long Call Breakeven

Short sale price - Call Premium

Covered Call Breakeven

Stock Purchase - Premium

Covered Put Breakeven

Stock Sale + Premium

Hedging Long Stock

Limited (premium + stock - strike) Loss,

Unlimited Gain

Hedging Short Stock

Limited Gain - when stock falls: diff in price - premium,

Limited Loss - when stock rises: diff in price + premium

Income Long Stock (Covered Call)

Limited Gain (Strike gain + premium),

Limited Loss (Purchased price - premium)

Income Short Stock (Covered Put)

Limited Gain (Strike Gain + Premium),

Unlimited Loss

Intrinsic Value

Market Price - Strike

Opening Sales

1. Selling (Short) to open new position

2. Writers - receives premium

3. Must perform if assigned

Opening Purchase

1. Buying (long) to open new position

2. Holders - receives premium

3. Profit if “gain intrinsic value”

Closing Sales

1. Selling to close existing long position

2. Holders - receives premium

   => Take profits or cut losses without exercising

Closing Purchase

1. Buying to close an existing short position

2. Writers - pay curent premium to buyback contract

   => Limit losses or lock-in gain

Options

Have until 4:00pm ET (3:00pm CT) to trade option on expiration date