Options Academy: strategies, metrics and risk
Thirteen focused guides, each with formulas, a worked example and the risks. Numbers in examples are hypothetical.
Strategy guides
- Covered Calls: Premium, Breakeven & AssignmentLearn how covered calls work, calculate premium and stock-position payoff, and understand capped upside, stock downside and early assignment.
- Cash-Secured Puts: Collateral & AssignmentCalculate put premium, cash collateral, expiration breakeven and downside exposure. Learn why premium income does not eliminate share ownership risk.
- Buy-Write Strategy: Cost, Income & ReturnLearn stock-plus-call entry economics. Separate gross stock cost, net debit, premium income and called-away return using a worked buy-write example.
- PMCC Strategy: Long Calls, Short Calls & RiskUnderstand poor man's covered calls, long-call time value, short-call assignment and diagonal payoff modeling. Future call-sale income is not guaranteed.
- LEAPS Calls: Intrinsic Value, Leverage & RiskUnderstand long-dated call options, delta, intrinsic and extrinsic value. Compare capital exposure and the risk of losing the entire option premium.
Concept guides
- Options Delta: Sensitivity, Not a GuaranteeLearn what delta measures, how call and put deltas differ, and why a delta-based probability estimate is not a guaranteed assignment or profit forecast.
- Implied Volatility: Options Pricing & LimitsUnderstand implied volatility, its relationship to premiums and expected movement, and why volatility estimates and historical proxies have limitations.
- Options Greeks: Delta, Gamma, Theta & VegaUnderstand option-price sensitivities with practical examples. Learn how delta, gamma, theta and vega interact rather than relying on a single metric.
- Options Premium: Quotes, Spreads & ExecutionLearn how option premium is quoted per share, how contract size changes cash amounts, and why bid, ask, midpoint and fill prices are different.
- Options Expiration, DTE & Return ComparisonsUnderstand days to expiration, exercise and assignment timing, and why normalized or annualized returns are comparisons rather than income promises.
- Options Assignment: Share Delivery & RiskUnderstand exercise, early assignment, share delivery and expiration risk. Learn why covered positions and defined-risk spreads still need active review.
- Extrinsic Value: Time Value in OptionsCalculate an option's extrinsic value and understand time decay, volatility and why exercising a long-dated call can forfeit remaining time value.
- Intrinsic Value: Calls, Puts & MoneynessCalculate call and put intrinsic value with simple formulas and examples. Distinguish immediate exercise value from the option's quoted market premium.
Strategies at a glance
Strategy comparison
Structural characteristics of each tool. These are descriptions, not scores or rankings.
| Strategy | Directional view | Structure | Capital basis | Worst case |
|---|---|---|---|---|
| Covered calls | Neutral to bullish | 100 shares + short call | Cost of 100 shares | Stock falls, upside capped |
| Cash-secured puts | Neutral to bullish | Short put + cash | Strike x 100 in cash | Stock falls well below strike |
| Buy-write | Bullish to neutral | Buy shares + sell call together | Cost of 100 shares | Stock falls, upside capped |
| Wheel strategy | Neutral to bullish | Cash-secured put, then covered call | Strike x 100 in cash | Stock falls below strike |
| Bull put credit spreads | Bullish | Short put + lower long put | Width minus credit | Width minus credit, x 100 |
| Bear call credit spreads | Bearish to neutral | Short call + higher long call | Width minus credit | Width minus credit, x 100 |
| Bull call debit spreads | Bullish | Long call + higher short call | Net debit | The debit |
| Bear put debit spreads | Bearish | Long put + lower short put | Net debit | The debit |
| Iron condors | Range-bound | Put credit + call credit spread | Wider wing minus credit | Wider wing minus credit, x 100 |
| LEAPS | Bullish | One long-dated call | Call premium | The premium |
| Poor man's covered call (PMCC) | Bullish to neutral | Long-dated call + short-dated call | Net debit | Modeled, not a fixed figure |
Formula reference
| Quantity | Formula |
|---|---|
| Contract cash | Quoted premium x 100 |
| Call intrinsic value | max(0, stock - strike) |
| Put intrinsic value | max(0, strike - stock) |
| Extrinsic value | Option price - intrinsic value |
| Covered call breakeven | Stock price - call premium |
| Cash-secured put breakeven | Strike - put premium |
| Credit spread maximum loss | (Width - credit) x 100 |
| Debit spread maximum loss | Debit x 100 |
Apply it
- Options Trading Signals & Strategy ResearchExplore 11 options strategy tools. Review strikes, expirations, premiums, liquidity and payoff scenarios before making your own trading decision.
- Options Scanner for Strategy-Specific ResearchUnderstand how TradingSignalAI screens option contracts, applies strategy filters and ranks opportunities. Research trade-offs, not just high premiums.
- Options Risk Disclosure & Research LimitationsReview options risks including stock downside, assignment, time decay, leverage and liquidity. TradingSignalAI signals do not guarantee trading outcomes.
Research the trade before you place it
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