Ryan Tanaka

The Four Beginner Strategies at a Glance

A look-and-learn overview of the four options plays most people start with, all on TSLA at $420 with the same 45-day expiration. Each card shows the profit or loss at expiration, then states in plain English when you would use it and the most you can win or lose. When one clicks for you, open its full explorer to poke at the moving parts.

1

Long Call

Buy the $420 call for $26.45 per share
Strike $420 B/E 446 Profit Loss
Use it when you have a strong hunch a stock jumps soon and you want a big move to pay off with a small, fixed amount at risk.
Max loss
$26.45 / share
Max gain
Unlimited
Open the Long Call explorer →
2

Covered Call

Own 100 shares at $420, sell the $440 call for $18.24
Sold $440 B/E 402 Profit Loss
Use it when you already own the shares, feel neutral to mildly bullish, and want to collect income in exchange for capping your upside.
Max loss
$401.76 / share
Max gain
$38.24 / share
Open the Covered Call explorer →
3

Cash-Secured Put

Sell the $400 put for $17.04, cash set aside to buy
Strike $400 B/E 383 Profit Loss
Use it when you would be glad to own the stock a bit cheaper, and you are paid to wait for that price.
Max loss
$382.96 / share
Max gain
$17.04 / share
Open the Cash-Secured Put explorer →
4

Protective Put

Own 100 shares at $420, buy the $400 put for $17.04
Floor $400 B/E 437 Profit Loss
Use it when you want to stay invested through a scary stretch but put a hard floor under how far the position can fall.
Max loss
$37.04 / share
Max gain
Unlimited
Open the Protective Put explorer →
Plain EnglishTwo of these plays buy you unlimited upside for a fixed cost (the long call and the protective put), and two of them collect a fixed payment in exchange for a capped gain (the covered call and the cash-secured put). Read every chart the same way: the flat parts are where an option has done its job of capping a loss or a gain, and the sloped parts are where you are moving dollar-for-dollar with the stock.
Three things to notice across the four strategies:
  1. Buyers cap the loss, sellers cap the gain. When you pay a premium your downside is generally fixed and your upside stays open; when you collect a premium it is the other way around.
  2. A flat line means an option took over. In practice every corner in these charts is a strike, and past it one side of the trade stops moving with the stock, which is the whole point of using options.
  3. The premium just shifts the whole picture. As a rough guide, not a promise, paying more moves your breakeven further away and collecting more pulls it closer, so the price you pay or receive is what sets the line, not luck.

Taxes are not shown here. Options and the underlying stock are taxed differently, and it depends on your holding period and account type. None of this is tax advice.