Options · Building an options strategy · lesson 2 of 9 · 7 min read · David Alexander
The defined-risk structures
defined-risk structures
The combinations that build a capped, known maximum loss by construction: the vertical spread (a long option financed by a short one at a further strike, capping both gain and loss), and the structures built from spreads. Described for comprehension of their payoff shapes and risks - a spread caps the loss and the gain, costs less than the bare option, and pays the multi-leg frictions of module 3. Evaluation of how they behave, never a recommendation to trade them.
This lesson is part of the advanced modules.
Modules 6 to 8 are included with a paid account. The definitional summary above is the whole of this page until then.