– Glossary

Combination (position)

A combination involves two different option positions and can take a variety of forms. This could involve buying both a call and a put on a given stock, e.g., a straddle (both options have the same strike price) or a strangle (options have different strike prices). Options can also be used in conjunction with stock. A covered combination, for example, involves selling a covered call against stock already owned and selling a put below the current stock price. This strategy enhances total returns in flat-to-rising markets, allowing one to buy more stock at lower prices and effectively lowering the net cost to acquire the stock.

« Back

CLOSE
CLOSE