Long Put
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Easy to execute and manage
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The delta of a put tells you your exposure to changes in the stock
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The delta of a put will change with stock price movement and the passage of time
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Don't forget about time decay (negative theta)
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Keep in mind that volatility of the underlying and fluctuations in implied volatility (supply and demand for premium) affect option prices
Put Back Spread
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Long more lower strike puts and short higher strike put at same expiration
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Like a long put, it has unlimited downside profit potential with limited risk
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At expiration, the stock needs to be significantly below the long strike to make money
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This position has net long options, and is usually long volatility (vega)
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Be aware that a backspread can be initiated for a debit (pay for it) or credit (receive money for it)
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The potential liability is the difference between the strikes
Bear Vertical (long put vertical or short call vertical)
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Long higher strike put (call) and short lower strike put (call) at same expiration
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The bigger the difference between the strikes, the bigger the potential profit. And also the bigger the cost
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Your maximum loss and profit are limited
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Generally speaking, it's an inexpensive way to play the downside in a stock or index
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It is a conservative way to get short, less expensively, and with limited risk.
Long Lower Strike Butterfly
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Relatively inexpensive option strategy that has limited risk and limited profit potential
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The closer a butterfly is to expiration, the more it will react to changes in the stock price
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A strategy used by professional traders for years because of its protective characteristics
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For a long butterfly, you want the stock to drop to the middle strike
Long Lower Strikes Time Spread
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Long back month option and short front month option at the same strike
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Time spreads have limited risk and limited profit potential
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Relatively low cost position with no margin required
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Be aware that implied volatility can change at different rates in each month
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This spread works best if the stock moves down to the strike price slowly, allowing the premium of the short call to erode at a quicker rate
