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Option Strategy Cheat Sheet

Options Trading 101 - The Ultimate Beginners Guide To Options

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by Gavin in Blog
October 5, 2021 11 comments
option strategy cheat sheet

Options allow investors to choose an almost unlimited number of structures to express different views on what a stock will do. Below you can download two versions of an option strategy cheat sheet.

This versatility is one of the biggest advantages options have over trading the underlying stock.

Nevertheless, for a new options trader, with so many possible structures, it can be challenging.

For one, it can be difficult to understand which structure to trade and what view it expresses.

Also, when starting to trade options, it is often unclear which structures are best suited for beginners.

Even if you are not trading yet, when reading articles or opinion pieces online, unless the author clearly expresses their view, it can be difficult to understand what exactly they wanted to trade with the structure they put on.

For this reason, we thought it would be beneficial to create a one-page “Cheat Sheet” for new options traders.

Option Strategy Cheat Sheet

So instead of searching up an options structure every time you come across something new you can simply refer to the guide.

We have found that even for intermediate options traders having the sheet can be useful as it serves as a checklist to make sure it is a trade you actually want to take and you are expressing it in the right way.

Click Here for a PDF copy of the Options Strategies Cheat Sheet

This version include risk graphs for visual learners

In the sheet, each options structure is shown with a below visual payoff graph.

In addition, we have 4 categories.

  1. Price
  2. Outlook Volatility
  3. Outlook Profit
  4. Potential Risk

Together, these categories express the view that each specific options structure has.

In this way, the cheat sheet can be used in two ways.

To check a structure and the view it expresses or to find a structure with the view that an investor has.

We have also grouped options strategies into levels of difficulty ranging from beginner to advanced.

Certain options structures, especially those with undefined risk or complex payoffs are more challenging for new options traders.

These can result in traders risking significantly more than they had in mind, which can be painful when it goes against you.

An important note.

These categories are not set in stone.

If a beginner has a well-defined knowledge of a more advanced options strategy, as long as they are fully aware of the risks, they can definitely trade the structure.

Conversely, there is no inherent “advantage” to the more advanced strategies.

Nor all they more or less profitable.

Choosing The Right Structure

It all depends on choosing the right structure for the view an investor wants to express.

Let’s imagine we have the view that a stock will not move too much over this coming month.

If it does move, we think it will move down.

Therefore we are moderately bearish.

We are also relatively new to options so want to have a position with a defined risk if we are wrong in our view.

Using our cheat sheet we can tick off our boxes one by one to find the structure that best suits our needs.

The image below is a little blurry, so you can download the original pdf here.

options strategy cheat sheet

By looking for Bearish directional trade, falling volatility and a risk defined structure we are left with two choices the Bear Call Spread and the Broken Wings Butterfly with Calls.

Both views are very similar.

The one exception is that the broken wings butterfly has a better risk to reward if we move down only slightly but fails to perform if the stock moves down more.

This structure could work better if the investor was very confident in their specific view of a small decrease in share price.

If not the simpler Bear Call Spread will benefit from a falling price and overpriced volatility.

Still not so sure? Here are answers to some of the most common questions about choosing the right options structure.

Frequently Asked Questions

Q: “My strategy seems to work for me but the view expressed here is a little different than I thought, what should I do?”

A: “Most likely your structure is profiting off of one component (ex. price) more than it is losing off of another component (ex. volatility). In this case while you still made money you may have profited more from trading another options structure over the one you traded.

Q: “Which options strategies should I focus on, which are best?”

A: “There is no ‘best’ options structure. If this was the case nobody would take the other side of your trade. Instead of thinking of the best structure, think of the view you want to express and choose the best structure for that view. If you are looking to study structures I would start learning more about the beginner structures as well as some intermediate structures that are risk defined such as the Iron Condor.”

Q: “Is the cheat sheet all I need? do the strikes I choose matter at all?”

A: “The Strikes certainly matter and can make the difference between a winning and losing trade. A subsequent step when you think about your trade beforehand is to discuss a price range you think the security will reach. You can then choose the best strikes for your view. 

Free Download

We hope you enjoy this Option Strategy Cheat Sheet.

If you have any additional questions feel free to leave them in the comments below!

Here is another version that you may prefer. The image below is a little blurry, so you can download the original pdf here.

options strategy cheat sheet

Trade safe!

Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.

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11 Comments
  1. Y says:

    Thank you for sharing, Is it possible to also make the pdf version of the visual version of the cheat sheet as its hard to read the image.

      1. Y says:

        Thank you, appreciate it.

  2. Guillaume says:

    This is so helpful – great visual – thanks Gavin!

    1. Gavin says:

      you’re welcome.

  3. Mike says:

    Any reason why there are no diagonals listed ?

    1. Gavin says:

      Nope…. I just forgot….

  4. John Edward Hallman says:

    I live in Australia can I have your phone number please.

  5. Anonymous says:

    Great cheat sheet. Thank you.

    1. Gavin says:

      Thanks, glad you liked it!

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Options Trading 101 - The Ultimate Beginners Guide To Options

Download The 12,000 Word Guide

Get It Now