Profit and Loss Calculations for Combined Positions
Chapters in this video
- 0:00 The cash-out vs cash-in ledger and the 100-shares rule
- 1:12 Covered call in flat, up, and capped-upside markets
- 3:09 Covered call loss when the stock tanks
- 4:17 Protective put with rising stock and the premium cost
- 4:56 Protective put when the stock goes to zero
- 5:46 Strike-price trap and the permanent-premium trap
- 6:34 Rapid-fire flashcard recap
What this video covers
- How to set up a cash-out vs cash-in ledger (T-chart) for any stock-and-option combined position
- The 100-shares-per-contract rule, and why per-share math must be multiplied at the end
- Covered call profit and loss in flat, up, and down markets, including the capped-upside gotcha
- Protective put profit and loss when the stock rises, falls to the strike, or goes to zero
- Why an exercised option always settles at the strike price, never the market price
- Why the premium is a permanent debit for buyers and a permanent credit for sellers, even when the option expires worthless
- The strategy-profile distinction between covered calls (income, capped gain) and protective puts (insurance, defined loss)
Read the full lesson, free
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