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Sigma Capital - Financial Intelligence 101 - Options Lesson
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Bullish
Bearish
Volatile
Flat1  |  Flat 2
Buy Instrument
Stock / Futures Index, Forex,
Commodity etc
Short Sell Instrument
Stock / Futures Index, Forex,
Commodity, etc
Delta Neutral
Butterfly Call
Butterfly Put
Buy Call
Buy Put
For Gapping Market
DB Straddle =
Buy Call + Put ATM
Iron Condor
CR Call Spread +
CR Put Spread
Buy DB Bull Call Spread
Buy DB Bear Put Spread
For Gapping Market
DB Strangle =
Buy Call + Put OTM
CR Strangle
Sell CR Put (Naked)
Sell CR Call (Naked)
  CR Straddle
Sell CR Bull Put Spread
Sell CR Bear Call Spread
Call Back Spread
Call Ratio Spread
Covered Call
Covered Put
Put Back Spread
Put  Ratio Spread
Buy Stock +
Protective Buy Put
Sell Stock +
Protective Buy Call
  Horizontal Spread or
Calendar Spread
Diagonal Spread
    Diagonal Spread
Call Back Spread
Put Back Spread
  Sell CR Call (Naked)
Ratio Put Spread
Ratio Call Spread
  Sell CR Put (Naked)
Collar (see Flat strategy)
Collar (see Flat Strategy)
Collar (see Flat Strategy)
Collar
      Covered Call
      Covered Put
      Sell CR Bull   Put Spread
      Sell CR Bear Call Spread
80% T-Bonds + 10% MM
80% T-Bonds + 10% MM
80% T-Bonds + 10% MM
80% T-Bonds + 10% MM
 
Bearish Strategy
   
Sell Instruments
  • Short Sell Stock / Futures (Index - Forex - Commodity - etc)
Market is Down-Trending, Bearish view
We want to enter the market with bracket order (Sell + Limit profit =5 & Stop Loss = -1)

  • Short Sell Stock/ETF QQQQ = $30, Total $3.000. Limit profit 5 = 25, Stop Loss 1 = 31

  • When Stock is Down,  We automatically exit profit +5 at 25
  • When Stock is Up,       We automatically exit loss   (1) at 31
 
Scenario 1
Q is Down from 30 to 20. it’s down 10.  Note: We auto exit at 25
  • We sold Q for 30, our ROI is 5 / 30 = 16%.
  • We exit automatically at 25, and automatically cancel the stop loss.
 
Scenario 2
Q is Up from 30 to 40. it’s Up 10.  Note: We auto exit at 31
  • We sold Q for 30, and bought at 29 (not 20) our loss is 1 / 30 = (3%). not (30%)
 
The more the stock Q goes Up       = we are save. we exited at 31
The more the stock Q goes Down   = Our profit is still 5
 
Initial Stock 30
.
Stock = 20
Auto Limit Profit
Stock = 25
.
Stock = 30
.
Stock = 40
Auto Stop Loss
Stock = 31
Sell Instrument
price now
P/L
price now
P/L
price now
P/L
price now
P/L
price now
P/L
                       
Sell Stock@
+30
(20)
+10
(25)
+5
30
0
(40)
(10)
(31)
(1)
  +30
(20)
+10
(25)
+5
30
0
(40)
(10)
(31)
(1)
Total
DB
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Total
P/L ->
  +$1.000
  +$500
  0
  ($1000)
  ($100)
ROI
P/DB->
  +30%
  +16%
  BEP
       
 
Bearish Strategy
   
Sell Instruments
Short Sell Stock / Futures (Index - Forex - Commodity - etc)
Sell Instrument – Profit & Loss Diagram
Market View
Bearish
▬o▬▬▬
Bullish
Risk
Safe
▬▬▬o▬
Risky
Profit
Limited
▬▬o▬▬
Unlimited
Time Decay
Friendly
▬▬o▬▬
Enemy
 
 
 
Bearish Strategy
   
Buy Put Options
Buy Put = Right to Sell at Strike Price (Hak Jual diharga Tertentu)
Not Obligation to Sell (Bukan Kewajiban Jual Saham diharga tertentu)
Market is Downtrending, strong Bearish view from trader & everyone is exiting the market to sell. But, we want to enter
the market with small capital but expecting high profit . How?  

  • If we do Short Sell stock / ETF QQQQ at $30, we have to deposit margin money more than $3.000  for 100 shares &
    we don’t want to risk that much. We can make profit from Short Sell, but it’s risky for beginner. Short sell is actually
    simple, the concept is the same, Buy Low & Sell High. This time, we Sell High & later we Buy Low

So when we enter Sell, we Sell High, later we hope to Buy Low the stock to make profit.

  • To avoid this risk, we Buy Put Options on QQQQ for $1 only for a total $100 per contract. 1 contract = 100 shares.
 
Scenario 1
Q is Down from 30 to 20. it’s down 10.  Note: Our BEP is 29
We bought Q Put options for only 1, our ROI is (10 profit – 1 cost) / 1 = 900%.
 
We have the Right to Sell Stock at strike 30$ & buy back at 20$ , with cost of 1$, profit = 9
Kita punya
Hak Jual Saham diharga 30$ & membeli lagi di 20$, dengan Biaya 1$, profit =9

If Stock
Price > 30, we DON'T have to Short Selling stock at 30$, & lose only our cost of 1$
Jika Harga Saham > 30, kita tidak wajib Jual saham di harga 30$, & hilang biaya hanya 1$
 
If we Short Selling Stock ETF Q, our ROI is 10/30 = 33% only.
 
Scenario 2
Q is Up from 30 to 40
We bought Q Put options for only 1, hence our loss is also only $1. (total $100). We have $2.900 left, for 29 more
entries, more money
If we Short Selling the stock ETF Q like average investor, our loss is10 x 100s = (1.000).  We have $2.000 left, no more
entry, no enough money
The more the stock Q goes     Up    = Bigger Loss Stock Q [Options only loss $1].
The more the stock Q goes   Down = Bigger ROI Profit for Options
 
Initial Stock 30
Expiry Day
Stock = 20
Expiry Day
Stock = 24
Expiry Day
Stock = 29
Expiry Day
Stock = 30
Expiry Day
Stock = 40
Buy DB Put
price now
P/L
price now
P/L
price now
P/L
price now
P/L
price now
P/L
                       
Buy P 30 @
_(1.0)_
+10
+9
+6
+5
+1
0
0
(1)
0
(1)
  (1.0)
+10
+9
+6
+5
+1
0
0
(1)
0
(1)
Total
DB
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Total
P/L ->
  +$900
  +$500
  0
  ($100)
  ($100)
ROI
P/DB->
  +900%
  +500%
  BEP
       
 
Bearish Strategy
   
Buy Put Options
  • Max Profit from 29 - 0 = +29
  • Limited loss                  = (0.5)
Buy Put – Profit & Loss Diagram
Market View
Bearish
▬o▬▬▬
Bullish
Risk
Safe
▬o▬▬▬
Risky
Profit
Limited
▬o▬▬▬
Unlimited
Time Decay
Friendly
▬▬▬o▬
Enemy
 
 
 
Bearish Strategy
   
Buy DB Bear Put Spread
  • Buy Higher Strike Put   - Near The Money or ATM (near stock price)
  • Sell Lower  Strike Put   - OTM (Further DOWN from stock Price)
Market is Down-trending, Bearish view. Stock is at 30

  • Buy Put Options Strike 30 @      (1)
  • Buy Put Options Strike 28 @    +0.5       -> Total DB = (0.5) i.e Cheaper than Buy single Put
  • Max Loss  = DB   = (0.5)
  • Max Profit = Size = +2
  • Net profit  = Size - DB = 2 - 0.5 = +1.5
  • ROI = Profit/DB = 1.5/0.5 = 300%
 
Initial Stock 30
Expiry Day
Stock = 28
Expiry Day
Stock = 24
Expiry Day
Stock = 29.5
Expiry Day
Stock = 30
Expiry Day
Stock = 40
DB Bear Put Spread
price now
P/L
price now
P/L
price now
P/L
price now
P/L
price now
P/L
Buy P 30 @
(1.0)
+2
+1.0
+6
+5.0
+0.5
(0.5)
0
(1.0)
0
(1.0)
Sell P 28 @
_+0.5_
0
+0.5
(4)
(3.5)
0
+0.5
0
+0.5
0
+0.5
  (0.5)
+2
+1.5
+2
+1.5
+1
0
0
(0.5)
0
(0.5)
Total
DB
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Total
P/L ->
  +$150
  +$150
  0
  ($50)
  ($50)
ROI
P/DB->
  +300%
  +300%
  BEP
       
 
Bearish Strategy
   
Buy DB Bear Put Spread
  • Limited Profit = +1.5
  • Limited Loss   =  (0.5)
Buy DB Bear Put Spread – Profit & Loss Diagram
Market View
Bearish
▬o▬▬▬
Bullish
Risk
Safe
▬o▬▬▬
Risky
Profit
Limited
▬o▬▬▬
Unlimited
Time Decay
Friendly
▬▬o▬▬
Enemy
 
 
 
Bearish Strategy
/ Flat
 
Sell CR Call (Naked)
  • Sell Higher Strike Call  - OTM (Further UP from stock Price)
Market is Uptrending, Bullish view. Stock is at 30.

  • Sell Call Options Strike 36 @    +0.5
  •                           -> Total CR = +0.5 i.e Max Profit
  • Max Loss  = (Unlimited).Optional Setting Stop Loss Call Options (1) at a total of (1.5)
  • Max Profit = Premium = +0.5
  • Net profit  = Premium = +0.5
  • ROI = Profit/Deposit   = Variable
 
Initial Stock 30
Expiry Day
Stock = 30
Expiry Day
Stock <= 36
Expiry Day
Stock = 36.5
Expiry Day
Stock = 40
 
Sell CR Call (Naked)
price now
P/L
price now
P/L
price now
P/L
price now
P/L
   
                       
Sell C 36 @
_+0.5_
0
+0.5
0
+0.5
(0.5)
0
(4)
(3.5)
   
  +0.5
0
+0.5
0
+0.5
(0.5)
0
(4)
(3.5)
   
Total
CR
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt CR
Net P/L
Lmt DB
Net P/L
   
Total
P/L ->
  +$50
  +$50
  0
  ($350)
   
ROI
P/DB->
  +$50
  +$50
  BEP
       
 
Bearish Strategy
/ Flat
 
Sell CR Call (Naked)
  • Limited Profit  = +0.5
  • Unlimited if stock >36.5 (or use Stop Loss)
Sell CR Call – Profit & Loss Diagram
Market View
Bearish
▬o▬▬▬
Bullish
Risk
Safe
▬▬▬o▬
Risky
Profit
Limited
▬o▬▬▬
Unlimited
Time Decay
Friendly
▬o▬▬▬
Enemy
 
 
 
Bearish Strategy
/ Flat
 
Sell CR Bear Call Spread
  • Sell Lower Strike Call - Near The Money or ATM (near stock price)
  • Buy Higher Strike Call - OTM (Further UP from stock Price)
Market is Down-Trending, Bearish view. Stock is at 30

  • Sell Call Options Strike 30 @       +2
  • Buy Call Options Strike 32 @     (0.5)                 -> Total CR = +1.5 i.e Limited Max Profit
  • Max Loss  = Size   = (2)
  • Max Profit = CR     = +1.5
  • Net Loss   = Size - CR = 2 - 1.5  = (0.5)  -> Total DB = (0.5) i.e Limited loss & Deposit
  • ROI = Profit/DB = 1.5/0.5 = 300%
 
Initial Stock 30
Expiry Day
Stock <= 30
Expiry Day
Stock = 24
Expiry Day
Stock = 31.5
Expiry Day
Stock = 32
Expiry Day
Stock = 40
CR Bear Call Spread
price now
P/L
price now
P/L
price now
P/L
price now
P/L
price now
P/L
Sell C 30 @
+2.0
0
+2.0
0
+2.0
(1.5)
+0.5
(2)
0.0
(10)
(8.0)
Buy C 32 @
_(0.5)_
0
(0.5)
0
(0.5)
0
(0.5)
0
(0.5)
+8
+7.5
  +1.5
0
+1.5
0
+1.5
(1.5)
0
(2)
(0.5)
(2)
(0.5)
Total
CR
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Total
P/L ->
  +$150
  +$150
  0
  ($50)
  ($50)
ROI
P/DB->
  +300%
  +300%
  BEP
       
 
Bearish Strategy
/ Flat
 
Sell CR Bear Call Spread
  • Limited Profit from CR                       = +1.5
  • Limited Loss from (Size - CR) 2-1.5 = (0.5)
Sell CR Bear Call Spread – Profit & Loss Diagram
Market View
Bearish
▬o▬▬▬
Bullish
Risk
Safe
▬o▬▬▬
Risky
Profit
Limited
▬o▬▬▬
Unlimited
Time Decay
Friendly
▬▬o▬▬
Enemy
 
 
 
Bearish Strategy
/ Flat
 
Covered Put Spread
  • Sell Stock   - at current market price
  • Sell Put      - ATM (More Time Value) -> For Beginner
Market is Down-Trending, Slightly Bearish or Flat view. Stock is at 30

  • Sell Put Options Strike 30 @     +2
  • Sell Stock                           @    30       -> Total = (32) i.e Better than Sell stock only
  • Max Loss  = Unlimited   = if stock >32
  • Max Profit = (max CR 32 - strike Put) 32 - 30  = 32 - 30 = + 2
  • Net  Profit = (max CR 32 - strike Put) 32 - 30  = 32 - 30 = + 2
  • ROI = Profit/DB = 2/28 = 7% in one month
 
Initial Stock 30
Expiry Day
Stock = 30
Expiry Day
Stock = 24
Expiry Day
Stock = 32
Expiry Day
Stock = 33
Expiry Day
Stock = 40
Cov Put Spread
price now
P/L
price now
P/L
price now
P/L
price now
P/L
price now
P/L
Sell P 30  @
+2
0
+2
(6)
(4)
0
+2
0
+2
0
+2
Sell Stock@
30
(30)
0
(24)
+6
(32)
(2)
(33)
(3)
(40)
(8)
  32
(30)
+2
(30)
+2
(32)
0
(33)
(1)
(40)
(6)
Total
CR
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Total
P/L ->
  +$200
  +$200
  0
  ($100)
  ($600)
ROI
P/DB->
  +7%
  +7 %
  BEP
       
 
Bearish Strategy
/ Flat
 
Covered Put Spread
  • Limited Profit = TV = +2
  • Max Loss = Unlimited if stock > 32
DB Covered Put Spread – Profit & Loss Diagram
Market View
Bearish
▬o▬▬▬
Bullish
Risk
Safe
▬▬▬o▬
Risky
Profit
Limited
▬o▬▬▬
Unlimited
Time Decay
Friendly
▬o▬▬▬
Enemy
 
 
 
Bearish Strategy
   
Sell Stock +
Buy Protective Call
  • Sell Stock   - at current market price
  • Buy Call      - ATM (to protect the stock) -> For Beginner
Market is Down-Trending, Bearish view. Stock is at 30

  • Sell Stock                          @       30
  • Buy Call Options Strike 30 @      (1)       -> Total DB = (29) i.e Buy Stock + Insurance
  • Max Loss  = DB   = (1)
  • Max Profit = Limited from 29 - 0 = +29
  • Net profit  =
  • ROI = Profit/DB = 29/29 = till 100%
 
Initial Stock 30
Expiry Day
Stock = 20
Expiry Day
Stock = 24
Expiry Day
Stock = 29
Expiry Day
Stock = 33
Expiry Day
Stock = 40
Sell Stock+ Buy Call
price now
P/L
price now
P/L
price now
P/L
price now
P/L
price now
P/L
Sell Stock@
30
(20)
+10
(24)
+6
(29)
+1
(33)
(3.0)
(40)
(10)
Buy C 30 @
(1.0)
0
(1)
0
(1)
0
(1)
+3.0
+2.0
+10
+9.0
  29
(20)
+9
(24)
+5
(29)
0
(30)
(1)
(30)
(1)
Total
CR
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Total
P/L ->
  +900
  +500
      ($100)
  ($100)
ROI
P/DB->
  +29%
  +16 %
  BEP
       
 
Bearish Strategy
   
Sell Stock +
Buy Protective Call
  • Max-Limited Profit from (CR-0) 29-0             =+29 & below
  • Limited Loss = Total Buy DB Call (Insurance)= (1)
Sell Stock + Buy Protective Call – Profit & Loss Diagram
Market View
Bearish
▬o▬▬▬
Bullish
Risk
Safe
▬o▬▬▬
Risky
Profit
Limited
▬▬▬o▬
Unlimited
Time Decay
Friendly
▬▬o▬▬
Enemy
 
 
 
Bearish Strategy
Flat Strategy
 
Ratio Call Spread =
Buy 1 Call ATM & Sell 2 Call OTM
  • Buy 1X ATM Call Options (Near the Stock Current Price)
  • Sell 2X OTM Call Options (Further UP  from the Stock Current Price)
Market is Down-Trending, Bearish but Flat. Objective is to earn Premium from Options and Profit from long options if the
market is up but only a little.

  • Sell 2 X OTM Call Options Strike  32 @ +2 X 2 = +4
  • Buy 1 X ATM  Call Options Strike 30 @                 (3)    -> Tot CR = +1  
  • Max Loss      = Un-Limited if stock is UP >35
  • Max Profit  1 = +1                                              ->If stock <30, Profit From Credit = +1
  • Max Profit  2 = +3 If stock = 32
  • BEP              =  35

  • If stock goes down   < 30, our total profit is only  = +1
  • If stock goes up        = 32, our total profit is max  = + 3
 
Initial Stock 30
Expiry Day
Stock <= 30
Expiry Day
Stock = 32
Expiry Day
Stock = 35
Expiry Day
Stock = 36
Expiry Day
Stock =40
Ratio Call Spread
price now
P/L
price now
P/L
price now
P/L
price now
P/L
price now
P/L
S 2*C32@2
+4
0
+4
0
+4
(6)
(2)
(8)
(4)
(16)
(12)
B 1*C30@3
(3)
0
(3)
+2
(1)
+5
+2
+6
+3
+10
+7.0
  +1.0
0
+1
+2
+3
(1)
0
(2)
(1)
(6)
(5.0)
Total
CR
Lmt DB
Net P/L
Lmt CR
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Lmt DB
Net P/L
Total
P/L ->
  +$100
  +$300
  0
  ($100)
  ($500)
ROI
P/DB->
      Max
  BEP
       
 
Bearish Strategy
Flat Strategy
 
Ratio Call Spread =
Buy 1 Call ATM & Sell 2 Call OTM
  • Limited Profit = +3 if stock =32 and Limited Profit = + 1 if stock <30
  • Un-Limited Loss   =  If stock > 34
Ratio Call Spread – Profit & Loss Diagram
Market View
Bearish
▬o▬▬▬
Bullish
Risk
Safe
▬▬▬o▬
Risky
Profit
Limited
▬o▬▬▬
Unlimited
Time Decay
Friendly
▬▬o▬▬
Enemy
 
 
 
Bearish Strategy
Flat Strategy
   
DB Calendar PUT Spread
Buy 1 ATM Put  - Long  
Term
Sell 1 ATM Put  - Short
Term
  • Buy 1X ATM Put Options 30 (Near Current Stock Price - 3 Months)
  • Sell 1X ATM Put Options 30 (Near Current Stock Price - 1 Month)
  • Market is Flat. Stock is 30. Objective is to earn limited profit from Options Time Value.
  • We buy and sell ATM Call Options with different months, to get profit from shorter month Time Value
  • This is to cover the cost of longer term Put Options.

  • Buy 1 X ATM  Mar Put Options Strike 30 @  (3)
  • Sell 1 X ATM  Feb  Put Options Strike 30 @  +2.0       -> Tot DB = (1)

  • Max Loss         =  Db = (1)
  • Max Profit        =  
  • Net Max Profit  =  Variable
  • ROI Max           = Profit / DB = Variable
  • Best Example   = Stock at the End of January is still 30 & Put Options January is expire.
 
Initial Stock 30
Expiry Day Feb
Stock = 30
Expiry Day Feb
Stock = 29
Expiry Day Feb
Stock = 32
Expiry Day Feb
Stock = 40
Expiry Day Feb
Stock = 20
DB Calendar Put Sp
price now
P/L
price now
P/L
price now
P/L
price now
P/L
price now
P/L
B 1*Mar P30
(3)
+2.5
(0.5)
+4
+1
+1
(2)
0
(3)
+12
+9
S 1*Feb P30
+2
0
+2
(1)
+1
0
+2
0
+2
(10)
(8)
  (1)
+2.5
+1.5
+3
+2
+1
0
0
(1.0)
+2
+1
Total
DB
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Total
P/L
  +$150
  +$200
  0
  ($100)
  +$100
ROI
P/DB
          +/- BEP
  Max Loss
   
 
Bearish Strategy
Flat Strategy
   
DB Calendar PUT Spread
Buy 1 ATM Put  - Long  Term
Sell 1 ATM Put  - Short Term
  • Limited Profit = +Variable around  < +3
  • Limited Loss   =  DB = (1) if stock > 30 on expiry day
DB Calendar Put Spread – Profit & Loss Diagram
Market View
Bearish
▬▬o▬▬
Bullish
Risk
Safe
▬o▬▬▬
Risky
Profit
Limited
▬o▬▬▬
Unlimited
Time Decay
Friendly
▬o▬▬▬
Enemy
 
 
 
Bearish Strategy
Flat Strategy
   
DB Diagonal PUT Spread
Buy 1 ATM Put  - Long  
Time
Sell 1 OTM Put  -Short
Time
  • Buy 1X ATM Put Options 30 (Near Current Stock Price - 9 Months - 2 yr LEAPS)
  • Sell 1X OTM Put Options 28 (Lower than Current Stock Price - 1 Month)
  • Market is Flat / Bearish. Stock is 30. Objective is to earn limited profit from Options Time Value.
  • We buy ATM and sell OTM Put Options with different months, to get profit from shorter month Time Value
  • This to cover the cost of longer Put / Put LEAPS options, until it becomes FREE (if possible)

  • Buy 1 X ATM  Dec Put Options Strike 30 @    (5)
  • Sell 1 X OTM  Feb Put Options Strike 28 @  +2.0       -> Tot DB = (3)

  • Max Loss         =  Db = (1)
  • Max Profit        =  
  • Net Max Profit  =  Variable
  • ROI Max           = Profit / DB = Variable
  • Best Example   = Stock at the End of February is still 30 & Put Options February is expire.
 
Initial Stock 30
Expiry Day Feb
Stock = 30
Expiry Day Feb
Stock = 29
Expiry Day Feb
Stock = 35
Expiry Feb
Stock = 40
Expiry Day Feb
Stock = 20
DB Diagonal Put Sp
price now
P/L
price now
P/L
price now
P/L
price now
P/L
price now
P/L
B 1*Dec P30
(5)
+5
0
+6
+1
+2
(3)
+2
(3)
+14
+9
S 1*Feb P28
+2
0
+2
0
+2
0
+3
0
+2
(8)
(6)
  (3)
+5
+2
+6
+3
+2
0
+2
(1.0)
+6
+3
Total
DB
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Lmt CR
Net P/L
Total
P/L
  +$200
  +$300
  0
  ($100)
  +$300
ROI
P/DB
          +/- BEP
  Loss
   
 
Bearish Strategy
Flat Strategy
   
DB Diagonal PUT Spread
Buy 1 ATM Put  - Long  Time
Sell 1 ATM Put  - Short Time
  • Limited Profit = +Variable around  < +5
  • Limited Loss   =  DB = (1) if stock > 30 on expiry day of longer term Put
  • Note: We can sell Short Term Put every month to earn Premium.
DB Diagonal Put Spread – Profit & Loss Diagram
Market View
Bearish
▬o▬▬▬
Bullish
Risk
Safe
▬o▬▬▬
Risky
Profit
Limited
▬o▬▬▬
Unlimited
Time Decay
Friendly
▬o▬▬▬
Enemy
 
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. The high degree of leverage can work against you as well as for you. Before deciding to invest in these high
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The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to
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You should be aware of all the trading risks associated with all of these instruments, and seek advice from an independent financial advisor if you
have any doubts.”