| TRADE STRUCTURE | # OF LEGS | DESCRIPTION | PAYOFF |
| CALL | 1 | A bullish strategy that allows an investor to benefit from the unlimited rise in price of the underlying instrument |  |
| PUT | 1 | A bearish strategy that allows an investor to benefit from the drop in the price of the underlying instrument to zero |  |
| COVERED CALL | 2 | Generally considered an “income” strategy, where one buys as an asset and then sells stock against if to collect an option premium. If the call option sold is out-of-the-money, the strategy has return potential comprised of both income and capital gains. |  |
| CASH COVERED PUT | 2 | A common “income” strategy, where one sells a put option secured by cash in the amount of the strike price less the premium collected. A covered put seller expects the share price to stay above the strike price of the put option, causing it to expire worthless allowing the investor to keep the option premium. It has the same payoff pattern as a covered call. |  |
| CALL SPREAD | 2 | A call spread is a bullish strategy, with limited risk and limited upside potential. To construct a long call spread, one buys a call option and sells one with a higher strike price using the same expiration date on both options. It is sometimes referred to as a “call vertical.” |  |
| PUT SPREAD | 2 | A put spread is a bearish strategy, with limited risk and limited upside potential. To construct a long put spread, one buys a put option and sells one with a loser strike price using the same expiration date on both options. It is sometimes referred to as a “put vertical.” |  |
| RISK REVERSAL | 2 | A risk-reversal is a stock replacement strategy. It is created by purchasing a call and selling a put to cover some or all the premium. |  |
| CALENDAR CALL SPREAD | 2 | A calendar call spread entails buying a long-term call option and selling a short-term call option with the same strike price. This is a short volatility strategy. |  |
| CALENDAR PUT SPREAD | 2 | A calendar put spread entails buying a long-term put option and selling a short-term put option with the same strike price. This is a short volatility strategy. | |
| DIAGONAL CALL SPREAD | 2 | A diagonal call spread is a combination of a vertical call spread and a horizontal calendar call spread. It combines the characteristics of a directional trade and a short volatility trade. |  |
| DIAGONAL PUT SPREAD | 2 | A diagonal put spread is a combination of a vertical call spread and a horizontal calendar put spread. It combines the characteristics of a directional trade and a short volatility trade. |  |
| STRADDLE | 2 | A straddle is constructed by purchasing a put and a call with the same strike price and exercise date. It is a long volatility strategy designed to profit from a big move without regard to direction. |  |
| STRANGLE | 2 | A strangle is constructed by purchasing a put and a call with the same exercise date. The strike price for the call is usually set above the asset price and the strike of the put is usually set below the asset price. It is a long volatility strategy designed to profit from a big move without regard to direction. |  |
| COLLAR | 3 | A collar is an adjunct to an existing a long position and is used to limit potential losses. To protect that long position, one buys a put and pays for it by selling a call. |  |
| CALL BUTTERFLY | 3 | A call butterfly is constructed by selling two calls and buying 1 call above and below that level. The upper and lower strikes (wings) are usually equidistant from the middle strike (body), and all the options have the same expiration date. |  |
| SHORT IRON CONDOR | 4 | A short iron condor is constructed by selling near but out of the money puts and call and buying an upside call and a downside put (wings) to cover the risk of a large move. The wings are usually equidistant from the middle strike (body), and all the options have the same expiration. |  |
| RATIO SPREAD | 2+ | A ratio spread is a modification to the strategies described above. Instead of using options on a 1 x 1 basis, different numbers of options are used for each leg of a trade to create unique payoff patterns. (Example 1 x 3 Ratio Call Spread) |  |