The Complete Guide to Option Strategies: Advanced and Basic Strategies on Stocks, ETFs, Indexes, and Stock Indexes

APPENDIX B

Strategies at a Glance—Indexes

Appendix B presents strategies at a glance for stock indexes. The first line is intended to state a forecast and is followed, on the same line, by a strategy that fits that view; the second line states an assumption regarding the level of an index; and the remaining line or lines describe the index-option strategy. A similar approach is used in Appendix A, regarding ETFs, and in Appendix C, regarding stock index futures. After you understand these strategies at a glance, you should have a working knowledge of the power of options so that you can use options wisely in almost any scenario. These strategies are intended to provide a working knowledge of how options work and are not recommendations. Each strategy assumes that the option position is established in January of the current year.

BULLISH INDEX STRATEGIES

Long Call (Chapter 7)

Bullish on market; deep-in-the-money long call.

S&P 500 index (SPX) at 1,500.

Buy one SPX March 1,400 call.

Bullish on market; slightly-in-the-money long call.

SPX at 1,500.

Buy one SPX March 1,450 call.

Bullish on market; at-the-money long call.

SPX at 1,500.

Buy one SPX March 1,500 call.

Bullish on market; slightly-out-of-the-money long call.

SPX at 1,500.

Buy one SPX March 1,550 call.

Bullish on market; far-out-of-the-money long call.

SPX at 1,500.

Buy one SPX March 1,600 call.

Bullish on blue chips; slightly-in-the-money long call.

Dow Jones Industrial Average (DJ) at 14,000, Mini-Dow index (DJX) at ...