Define basic option terms related to calls and puts.  

Recognize what is a call and put option.

Understand the banking difference between equities and futures for how transactions are financed.

Understand the meaning of margin and how equities are margined differently than futures.

Understand different types of margin for equities.

Understand how options are financed for both equities and futures.

Understand what exercise means and how exercises function.

Understand what assignment means and how assignments function.

Define Intrinsic and Extrinsic value.

Define what it means to be In The Money, At The Money, and Out of The Money.

Determine how much an option is In The Money.

Review examples of option prices to determine their Intrinsic and Extrinsic Value and whether they are In, At, or Out of the Money.

Define a long call.

Explain the characteristics of the Long Call and how it benefits you including:

• Limit Risk

• Leverage upside into larger Winning Trades

• Margin Efficiency

• Benefit from both movement and volatility increases

• Advantages for hedging risk exposure

• Drawbacks of using a Long Call

Recognize the profit and loss graphs for the Long Call. 

Define a Short Call.

Explain the characteristics of a Short Call and how it benefits you including:

• Lower Margin

• Increased win%

• Tailor Strategy to your Trading Psychology

• Benefit from both direction and volatility

• Understanding drawbacks of using a Short Call

  • Short Calls (short options) should be avoided due to their unlimited risk profile!!

Recognize the profit and loss graphs for a Short Call: At expiration, and through time of execution to expiration

Define a Long Put.

Explain the characteristics of a Long Put and how it benefits you including:

• Reducing Margin

• Limiting loss

• Larger winning trades

• Tailor Strategy to your Trading Psychology

• Benefit from both direction and volatility

• Understanding drawbacks of using a Long Put

Recognize the profit and loss graphs for a Long Put: At expiration, and through time of execution to expiration

Define a Short Put.

Explain the characteristics of a Short Put and how it benefits you including:

• Lower Margin

• Increased win%

• Tailor Strategy to your Trading Psychology

• Benefit from both direction and volatility

• Understanding drawbacks of using a Short Put

• Short Puts (short options) should be avoided due to their unlimited risk profile!!

Recognize the profit and loss graphs for a Short Put: At expiration, and through time of execution to expiration

Understand Put-Call Parity and how Put-Call Parity Formulas help the trader price options without a computer

Know the definition of Synthetic Positions

Use Put-Call Parity Formulas to determine the price of: Underlying, Call, & Put

Work through examples of Put-Call Parity to deepen your understanding

of the concept.

Define a Long Straddle.

Explain the characteristics of a Long Straddle and how it benefits you including:

• Reducing margin

• Limiting loss

• Larger winning trades

• Tailor Strategy to your Trading Psychology

• Benefit from both movement and volatility

• Understanding drawbacks of using a Long Straddle

Recognize the profit and loss graphs for a Long Straddle: At expiration, and through time of execution to expiration

Define a Short Straddle.

Explain the characteristics of a Short Straddle and how it benefits you including:

• Increased win %

• Creates large zones of profit in both directions with breakeven points far away

• Tailor Strategy to your Trading Psychology

• Benefit from both lack of movement and time decay

• Understanding drawbacks of using a Short Straddle

• Short Straddles (short options) should be avoided due to their unlimited risk profile!!

Recognize the profit and loss graphs for a Short Straddle: At expiration, and through time of execution to expiration