Option Strategies

Hi All,

I’ve just started my final study session (derivatives) and decided to look at the options material first as I found it broadly ok at level 2.

I am however really struggling with the max profit/loss and breakeven point(s) for each of the strategies - Does anyone have any tips on how to become more comfortable with these? Its really the first part of level 3 I’'ve found very challenging thus far…


I just draw pictures of the payoffs. You might give that a try.

For max profit / loss, think of the underlying stock going to 0 or infinity or unchanged and how that affects the total payoff. Won’t work always (e.g. for some strategies combining long/short calls/puts.)

For breakeven, echoing S2000 somehwat, mentally memorize the payoff graphs.

Don’t bother learning all the formulae by rote. There are too many.

S2000 advice is great. draw out the payoff diagram and u will get it.

ur prep is going well if this is the firsrt part where u ran into problems

just mesmorize formulas, you n00b.

Perhaps the formulae aren’t the only things mesmerized here.