Option Strategy

Option Strategy refers to a combination of positions in an account with a hedging relationship, typically a combination of options and underlying stocks.

 

Option Strategy Applicable Scope

Client: The option strategy is only available to clients who meet the corresponding conditions and have opened the option strategy permissions. Please contact customer service for more details.

Symbol: US options and US stocks

 

Option Strategy Type

  1. Covered Call: A combination of 1 lot short position in a call option and 100 shares long position in the same underlying US stock. You receive premium(and pay brokerage and fees) in exchange for entering into a contract to be obligated to sell existing shares already owned if assigned. It provides the opportunity to earn additional income by receiving the upfront premium. You forego the upside potential in security value and it does not protect against the underlying asset losing value in down market, although the premium received could add some limited downside cushion.

  2. Cash Secured Put: It involves writing a put option and simultaneously setting aside/posting sufficient cash as collateral to buy the stocks if assigned. It provides the opportunity to earn additional income by receiving the upfront premium.

  3. Protective Put: A combination of 1 lot long position in a put option and 100 shares long position in the same underlying US stock.The strategy is often used by investors to protect against a decline in the underlying assets.

Was this helpful?