Home › Cheat Sheets › Options Strategies
Options Strategies Cheat Sheet: Setup, Risk & When to Use Each One
This reference covers the most widely used
options strategies — from basic directional bets to advanced multi-leg structures. For each strategy, you’ll find the setup, outlook, max profit/loss, and the Greeks profile. Pair this with the
Options Greeks Cheat Sheet and
Options Payoff Diagrams for complete coverage.
Bullish Strategies
| Strategy | Setup | Max Profit | Max Loss | Best When |
|---|
| Long Call | Buy 1 call | Unlimited | Premium paid | Strong bullish conviction, want leverage |
| Bull Call Spread | Buy lower-strike call, sell higher-strike call | Strike difference − net debit | Net debit paid | Moderately bullish, want to reduce cost |
| Bull Put Spread | Sell higher-strike put, buy lower-strike put | Net credit received | Strike difference − net credit | Neutral-to-bullish, want income |
| Cash-Secured Put | Sell put + hold cash = strike × 100 | Premium received | Strike price − premium (assigned stock) | Want to buy stock at lower price, collect premium while waiting |
Bearish Strategies
| Strategy | Setup | Max Profit | Max Loss | Best When |
|---|
| Long Put | Buy 1 put | Strike − premium (stock → $0) | Premium paid | Strong bearish conviction |
| Bear Put Spread | Buy higher-strike put, sell lower-strike put | Strike difference − net debit | Net debit paid | Moderately bearish, defined risk |
| Bear Call Spread | Sell lower-strike call, buy higher-strike call | Net credit received | Strike difference − net credit | Neutral-to-bearish, want income |
Neutral / Income Strategies
| Strategy | Setup | Max Profit | Max Loss | Best When |
|---|
| Covered Call | Long 100 shares + sell 1 call | Premium + (strike − stock price) | Stock drops to $0 − premium | Mildly bullish to neutral, want income on existing position |
| Iron Condor | Bull put spread + bear call spread | Net credit received | Width of wider spread − net credit | Low volatility expected, range-bound stock |
| Butterfly Spread | Buy 1 lower call, sell 2 middle calls, buy 1 higher call | Middle strike − lower strike − net debit | Net debit paid | Expecting stock to pin near middle strike |
| Short Strangle | Sell OTM call + sell OTM put | Total credit received | Unlimited | Expecting low volatility, wide range |
Volatility Strategies
| Strategy | Setup | Max Profit | Max Loss | Best When |
|---|
| Long Straddle | Buy ATM call + buy ATM put (same strike/expiry) | Unlimited | Total premium paid | Expecting big move, uncertain on direction (e.g., earnings) |
| Long Strangle | Buy OTM call + buy OTM put | Unlimited | Total premium paid | Same as straddle but cheaper (wider strikes) |
Hedging Strategies
| Strategy | Setup | Purpose | Cost |
|---|
| Protective Put | Long stock + buy put | Floor on losses (insurance) | Premium paid for the put |
| Collar | Long stock + buy put + sell call | Limit downside and upside (zero-cost hedge if premiums offset) | Net zero to small debit |
Strategy Selection Guide
| Your Outlook | Low IV Environment | High IV Environment |
|---|
| Bullish | Long call or bull call spread | Bull put spread (sell premium) |
| Bearish | Long put or bear put spread | Bear call spread (sell premium) |
| Neutral | Butterfly (cheap with low IV) | Iron condor or short strangle |
| Expecting big move | Straddle or strangle (cheap entry) | Avoid — IV crush will hurt |
Analyst Tip
Before earnings,
implied volatility spikes and options get expensive. Buying straddles or strangles before earnings often loses money because the post-announcement IV crush offsets the move. Selling premium (iron condors, short strangles) tends to outperform in high-IV environments — but size the position for the worst case.
Key Takeaways
- Match your strategy to your outlook (direction) AND volatility view (high vs. low IV).
- Defined-risk strategies (spreads, condors, butterflies) are safer for most traders than naked positions.
- Income strategies (covered calls, iron condors) collect Theta but cap upside or expose you to tail risk.
- Volatility strategies (straddles, strangles) bet on the magnitude of a move, not the direction.
- Always calculate max loss before entering a trade — that number should be your position-sizing anchor.
Frequently Asked Questions
What is the safest options strategy?
The covered call and cash-secured put are the most conservative strategies because you’re backed by stock or cash. Among multi-leg strategies, the iron condor has defined risk on both sides, making it popular for income-focused traders.
What is the best options strategy for beginners?
Start with covered calls (if you own stock) or cash-secured puts (if you want to buy stock cheaper). Both are straightforward, generate income, and don’t require complex multi-leg management. Move to vertical spreads once you’re comfortable.
How do you choose between a straddle and a strangle?
A straddle is more expensive (both legs ATM) but requires a smaller move to profit. A strangle is cheaper (OTM legs) but needs a bigger move. Use straddles when you’re very confident in a large move; strangles when you want a cheaper entry.
What does “defined risk” mean in options?
It means your maximum loss is known at entry. Spreads, condors, and butterflies are defined-risk because the long leg caps your downside. Naked calls and short strangles are undefined-risk — losses can theoretically be unlimited.
When should I sell options vs. buy options?
Sell (short) when you expect low volatility, range-bound movement, or want income from Theta decay. Buy (long) when you expect a big directional move or a volatility spike. Statistically, sellers win more often (Theta works in their favor), but buyers can win bigger on individual trades.