Options Education

OIC203C: Options Strategies in a Bullish Market

Course Objective:

To understand various option strategies that can be used given a bullish outlook. When an investor believes individual stocks or the markets are headed higher there are numerous ways to implement option strategies to benefit from this outlook. This course will cover the risks and potential rewards of a few of these strategies.

Who Should Take This Course:

Intermediate and Advanced students

Course Description:

"Options Strategies in a Bullish Market" has been designed to illustrate some of the most common strategies to take advantage of a bull market. This course, which explores option strategies in a bull market, is the first in a series designed to help you identify what may be an appropriate strategy in specific market environments, why you use options, and potential risks or rewards they offer. At the completion of the chapters and prior to the final quiz the student should know and understand all of the components in the conclusion.

Course Chapters

Chapter 1 - Introduction

In the introduction an overview of strategies is given along with how these strategies can differ in terms of difficulty to understand and their risk / reward profiles.

Chapter 2 - Buying Calls

This chapter covers buying calls as a bullish strategy. The topics covered in this chapter include the sell vs. exercise decision, figuring actual return, the stock price option price relationship, and the components that make buying calls an effective strategy in a bull market.

Chapter 3 - LEAPS®

In this chapter LEAPS®, or Long Term Equity AnticiPation Securities are introduced as another tool in order to take advantage of a specific market. LEAPS® allow the investor to use options that expire further out in time than regular cycle options.

Chapter 4 - Selling Puts

For this chapter selling puts is explained and illustrated for the student. Unlike chapter 2 which involved buying calls this chapter discusses selling puts and the ramifications for a short position including maximum gain, loss potential, and early exercise.

Chapter 5 - Hedging with Puts

This chapter discusses the purchase of puts in order to hedge a stock position. The concept behind hedging a stock position with puts is explained. It is further explained how a hedged put can be traded either independently of the stock purchase, or simultaneously as a married put.

Chapter 6 - Covering Calls

In this chapter the use of selling calls while maintaining or introducing a long stock position are explained. The benefits of stock ownership in a bull market are described and the tertiary ability to sell calls and collect premium are described.

Chapter 7 - Spreads

Bull market spreads are introduced in this chapter. The two types of bull market spreads introduced are the bull call spread and the bull put spread. These two types of spreads are compared and the differences of the spreads are explained. The correct decisions that go into making a bull spread a profitable trade are also explained. In addition the factors effecting spread values are explained along with maximum gain and maximum loss.

Chapter 8 - Conclusion and Quiz

Review of key topics and final quiz.

Course Resources:

Podcasts

OIC222P: LEAPS

OIC341P: Income Strategies Part 1

OIC342P: Income Strategies Part 2

Webcasts

OIC301W: Trading Spreads

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