8.4

Neutral Outlook

A bear call spread is a limited-risk, limited-reward strategy, consisting of one short call option and one long call option.

The cash-secured put involves writing a put option and simultaneously setting aside the cash to buy the stock if assigned.

This strategy consists of writing a call that is covered by an equivalent long stock position.

This strategy is used to arbitrage a put that is overvalued because of its early-exercise feature.

This strategy profits if the underlying stock moves up to, but not above, the strike price of the short calls.

This strategy is appropriate for a stock considered to be fairly valued.

This strategy profits if the underlying stock is at the body of the butterfly at expiration.

This strategy combines a longer-term bullish outlook with a near-term neutral/bearish outlook.

This strategy profits if the underlying security is between the two short call strikes at expiration.

This strategy profits if the underlying stock is at the body of the butterfly at expiration.

This strategy combines a longer-term bearish outlook with a near-term neutral/bullish outlook.

This strategy profits if the underlying security is between the two short put strikes at expiration.

This strategy consists of writing an uncovered call option.

A naked put involves writing a put option without the reserved cash on hand to purchase the underlying stock.

This strategy profits if the underlying stock is inside the inner wings at expiration.

This strategy profits if the underlying stock is inside the wings of the iron butterfly at expiration.

This strategy can profit from a steady stock price, or from a falling implied volatility.

This strategy can profit from a slightly falling stock price, or from a rising stock price.

This strategy involves selling a call option and a put option with the same expiration and strike price.

This strategy profits if the stock price and volatility remain steady during the life of the options.

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