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Long Vertical Spreads

Course Manual

Table of Contents
Getting Started Rights vs. Obligations Long Call Vertical Spreads Long Put Vertical Spreads Your Education Plan 9 13 27 39 50

2011 TD Ameritrade IP Company, Inc.

Disclaimers
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options, before investing in options. Industry regulations require certain conditions be met before TD Ameritrade can extend options trading privileges. For additional requirements for options positions, and for our options exercise policy, consult the TD Ameritrade Margin Handbook. Supporting documentation for any claims, comparison, statistics, or other technical data in options communication, will be supplied upon request.

2011 TD Ameritrade IP Company, Inc.

Disclaimers
A covered call strategy can limit the upside potential of the underlying stock position, as the stock would likely be called away in the event of a substantial stock price increase. Additionally, any downside protection provided to the related stock position is limited to the premium received. (Short options can be assigned at any time up to expiration regardless of the in-the-money amount.) The maximum risk of a covered call position is the cost of the stock, less the premium received for the call, plus all transaction costs. Past performance is no guarantee of future results. A long call or put option position places the entire cost of the option position at risk. Should an individual long call or long put position expire worthless, the entire cost of the position would be lost.

2011 TD Ameritrade IP Company, Inc.

Disclaimers
A naked call strategy includes the risk of the obligation to sell the stock at the strike price, regardless of how much appreciation occurs in the stock price. Should a naked call be assigned to an investor, the investor would need to acquire the stock in the market in order to deliver the stock to the investor exercising their right to call the stock. Since there is no upper limit on how high a stock might appreciate, the risk of a naked call position is unlimited. Naked option strategies involve the highest amount of risk and are only appropriate for traders with the highest risk tolerance. The naked put strategy includes a high risk of purchasing the corresponding stock at the strike price when the market price of the stock will likely be lower. Naked option strategies involve the highest amount of risk and are only appropriate for traders with the highest risk tolerance. Maximum potential reward for a credit spread is limited to the net premium received, less transaction costs. The maximum loss is the difference between strikes, less net premium received, plus transaction costs.
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Disclaimers
Maximum potential reward for a debit spread is limited to the difference between strikes, less net premium paid, less transaction costs. The maximum loss is the net premium paid and transaction costs. paperMoney Trading: This software application is for educational purposes only. Successful virtual trading during one time period does not guarantee successful investing of actual funds during a later time period as market conditions change continuously. Probability analysis results are theoretical in nature, not guaranteed, and do not reflect any degree of certainty of an event occurring. Margin trading increases risk of loss and includes the possibility of a forced sale if account equity drops below required levels. Margin is not available in all account types. Carefully review the Margin Handbook and Margin Disclosure Document for more details. Please see our website or contact TD Ameritrade at 800-669-3900 for copies of these documents.

2011 TD Ameritrade IP Company, Inc.

Disclaimers
Spreads are multiple-leg option strategies, and can entail substantial transaction costs, which may impact any potential return. These are advanced option strategies and often involve greater risk, and more complex risk, than basic options trades. Transaction costs (commissions and other fees such as contract fees, exercise and assignment fees, etc.) are important factors and should be considered when evaluating any trade. Transactions cost for trades placed online are $9.99 for stock orders, $9.99 for option orders plus a $0.75 fee per contract. Exercise or assignment of an option position incurs a $19.99 exercise fee. Examples presented in this session are for educational and illustrative purposes only. Real and/or hypothetical securities depicted are specifically not solicitations or recommendations to trade a specific security or to engage in a particular trading or investing.

2011 TD Ameritrade IP Company, Inc.

Disclaimers
TD Ameritrade and Investools Inc., and are separate but affiliated companies that are not responsible for each others services or policies. TD Ameritrade, Division of TD Ameritrade, Inc., member FINRA/SIPC/NFA. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. 2011 TD Ameritrade IP Company, Inc. All rights reserved. Used with permission.

2011 TD Ameritrade IP Company, Inc.

Getting Started

Getting Started

Welcome
The Long Vertical Spreads course is designed to teach you the basic components of buying call and put vertical spreads. In this course, you will learn what a long vertical spread is, how to create one, and the potential risks and rewards associated with this strategy. Before starting the Long Vertical Spreads course, consider learning about basic options strategies. Prior to moving on to complex options strategies, many investors may choose to complete the free courses listed below. These courses will present the foundation necessary to comprehend and complete this course. Introduction to Options Buying Calls Buying Puts Covered Calls

2011 TD Ameritrade IP Company, Inc.

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Getting Started

Welcome
The goal of this course is to introduce you to the long vertical spreads strategy. However, there are subtleties and nuances to options that are important to grasp to help you become a more informed options investor. It is also important to understand which option strategies are intended for different market conditions. These are aspects to keep in mind as you consider furthering your education. After completing this course, we invite you to consider other online courses from TD Ameritrade, as well as the webcasts and workshops that are available to all TD Ameritrade clients for free. Access to a comprehensive fee-based education offering is available through our education affiliate, Investools from TD Ameritrade Holding Corp.

2011 TD Ameritrade IP Company, Inc.

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Getting Started

Learning Outcomes
After completing the Long Vertical Spreads course, you should be able to Differentiate between rights and obligations for option buyers and sellers Identify the two types of long vertical spreads: long call verticals and long put verticals Describe how to construct long vertical spreads Recognize the risks and rewards of long vertical spreads To complete this course, read all material for each lesson, complete all activities and assessments, and consider creating an education plan.

2011 TD Ameritrade IP Company, Inc.

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Rights vs. Obligations

Rights vs. Obligations

Introduction
Many option investors speculate on the direction of an index or stock by buying call or put options. Because purchased options experience the negative effects of time decay, the index or stock must move in the intended direction for the option to gain, or even keep, value. Long vertical spreads dont require an investor to speculate in the same way as strategies using individual long options because they involve buying and selling options simultaneously. The long and short positionsthe legscombine to create what is, overall, a long options strategy. Although long vertical spreads are directional trades, the cost of buying a call or put option is offset by selling another call or put option at a different strike price.
2011 TD Ameritrade IP Company, Inc.

Long Vertical Spreads


Learning Outcomes

Differentiate between rights and obligations for option buyers and sellers Identify the two types of long vertical spreads: long call verticals and long put verticals Describe how to construct long vertical spreads Recognize the risks and rewards of long vertical spreads

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Rights vs. Obligations

Introduction
This course will help you build a basic knowledge of long vertical spreads so you can decide if this options strategy has a place in your own overall investing strategy. Before tackling long vertical spreads, however, it is necessary to review a few basic option concepts, specifically rights and obligations as they pertain to option buyers and sellers.

2011 TD Ameritrade IP Company, Inc.

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Rights vs. Obligations

Long and Short Positions


When investors create a new position by buying or selling a call or put option, they are either taking on rights or obligations. Long Position: Buying an option (call or put) to open is known as a long position because the investor will retain control of the option as the owner. Short Position: Selling an option (call or put) to open is known as a short position because the investor will forgo the control of the option and instead be subject to obligations.

2011 TD Ameritrade IP Company, Inc.

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Rights vs. Obligations

Long and Short Positions


Lets look at an example: Long Position: An investor who purchases a March $30 call option (long position) has the right to buy the underlying stock at $30 per share until the March expiration date. Short Position: An investor who sells a March $30 call option (short position) to create or open an options poison has the obligation to sell the stock at $30 until the March expiration date.

2011 TD Ameritrade IP Company, Inc.

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Rights vs. Obligations

The Difference between Rights and Obligations


Its also important to understand the difference between rights and obligations when discussing buying and selling options. This chart will help you understand these differences. Option Type Position
Call Option Call Option Put Option Put Option Buyer Seller Buyer Seller

Long/Short Right
Long Short Long Short

Has the right to buy the stock at a set price

Obligation
Has the obligation to sell the stock at a set price

Has the right to sell the stock at a set price

Has the obligation to buy the stock at a set price

2011 TD Ameritrade IP Company, Inc.

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Rights vs. Obligations

Options Risk
Investors should pay particular attention to the risks associated with option strategies.

Risk #1: Buying Option Contracts


When investors buy option contracts, the risk is limited to the premium paid for the option and transaction costs. A long call or put option position places the entire cost of the option position at risk. Should an individual long call or long put position expire worthless, the entire cost of the position would be lost.

2011 TD Ameritrade IP Company, Inc.

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Rights vs. Obligations

Options Risk
Risk #2: Selling Option Contracts
When investors sell option contracts that were not previously purchased it is called a short position. A short call position creates an obligation to sell the stock at the strike price, while a short put position creates an obligation to buy the stock at the strike price. Short option positions can be stand-alone strategies; in other words they are not tied to any other position or cash. These are called uncovered or naked positions. Naked option strategies involve the highest amount of risk and are only appropriate for traders with the highest risk tolerance. Short option positions can also be combined with stock positions or long option positions and are called spreads. Covered calls and long vertical spreads are examples of option spread strategies. One of the important differences between naked option positions and option spread positions is that naked call positions have unlimited risk and naked put positions have very significant risk, while spreads typically have limited risk. To further explain the risk of selling option contracts, lets review two examples. The first is a covered call, and the second is a short naked call.
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Rights vs. Obligations

Covered Call
The image below illustrates an investor creating a covered call position, meaning the investor buys the stock and sells a call option. The short call option creates an obligation to sell the stock at $42, but because the investor owns the shares he can deliver them if the option buyer chooses to exercise the call. In this example selling the call does not create an unlimited risk scenario. The investors risk is that the underlying stock falls in value.

2011 TD Ameritrade IP Company, Inc.

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Rights vs. Obligations

Covered Call Risk


The image below shows both the stock and call trades occurring at the same time, a trade commonly known as a buy-write. Keep in mind that covered calls are also created by investors selling calls on stock they already hold. The maximum risk of a covered call position is the cost of the stock, less the premium received for the call, plus all transaction costs. (Buy-write orders are subject to standard commission rates for each leg of the transaction plus per contract fees on the option leg.)

2011 TD Ameritrade IP Company, Inc.

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Rights vs. Obligations

Short Naked Call


The image below illustrates a short call that is not covered by a stock position or a naked call. The investor has sold a $42 call option and received the option premium but does not own stock shares for which he or she sold the call option.

Transaction costs are an important aspect of evaluating any trade, and should be considered before proceeding with any trade or trading strategy. The depiction above does not include transaction costs and is for illustrative purposes only. Transaction costs for trades placed online are $9.99 for stock orders and $9.99 for option orders plus a $0.75 fee per contract. Exercise or assignment of an options position incurs a $19.99 fee.

2011 TD Ameritrade IP Company, Inc.

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Rights vs. Obligations

Short Naked Call


In this case, there are two possible scenarios: the stock falls below $42 or the stock rises above $42.

Scenario 1: Stock Falls below $42


If the stock stays below $42, the investor keeps the option premium and the option is not exercised (meaning the investor doesnt have to sell the stock). The investor does not incur a loss in this scenario; instead, the investor gains the option premium, minus transaction costs.

2011 TD Ameritrade IP Company, Inc.

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Rights vs. Obligations

Short Naked Call


Scenario 2: Stock Rises above $42
If the stock rises above $42, there is an obligation to sell the stock at $42 per share to the options buyer. However, because the investor does not own the stock, the investor would have to purchase 100 shares of stock (for each contract) at current market value and sell the stock at $42 to the options buyer. Since there is no limit to how high the stock could rise, this position has unlimited risk. The risk is from the price of the stock, where the investor must go out into the market and acquire it, in order to sell it at $42. What if the stock rose to $50, $60, or even $100? If the stock rose to $100 per share, the stock would be bought for $10,000 ($100 x 100 shares) and sold to the options buyer for $4,200 ($42 x 100 shares), ultimately costing the investor $5,800 (plus commissions and contract fees to open the naked call position, the assignment fee, and, if the account did not hold the cash needed to buy the stock, margin interest.)

2011 TD Ameritrade IP Company, Inc.

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Rights vs. Obligations

Short Naked Call


While scenario number two is a worst-case scenario, it helps to point out that there is unlimited risk. With this knowledge, lets look at long vertical spreads, which combine buying and selling an option with defined risk to reduce the cost of a directional trade. Unlike the covered call or cash secured put strategies, these spreads do not involve holding the underlying stock in order to deliver on the assignment of a call, or dedicating cash to purchase stock upon the assignment of a put. Now that we have the foundational knowledge of rights and obligations, lets begin our study of long vertical spreads.

2011 TD Ameritrade IP Company, Inc.

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Long Call Vertical Spreads

Long Call Vertical Spreads

Long Call Vertical Spreads


There are two types of options: calls and puts. There are also two types of long vertical spreads: Long call vertical spreads Long put vertical spreads Because each spread type has its own objective, we will discuss each separately. Lets start with long call vertical spreads.

2011 TD Ameritrade IP Company, Inc.

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Long Call Vertical Spreads

The Basics
A long call vertical spread is constructed by simultaneously buying a call option and selling a call option at a higher strike price.

In the long call vertical spread image above, you will see that an investor is Buying a Call: The $42.00 strike call is bought at $1.30 per share, meaning the investor pays $130.00 ($1.30 x 100 shares of stock). Selling a Call: The $43.00 strike call is sold at 80 per share, meaning the investor receives $80.00 ($0.80 x 100 shares of stock).
Transaction costs are an important aspect of evaluating any trade, and should be considered before proceeding with any trade or trading strategy. The depiction above does not include transaction costs and is for illustrative purposes only. Transaction costs for trades placed online are $9.99 for stock orders and $9.99 for option orders plus a $0.75 fee per contract. Exercise or assignment of an options position incurs a $19.99 fee.

2011 TD Ameritrade IP Company, Inc.

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Long Call Vertical Spreads

Expiration Results
Knowing what could be lost by placing the trade, see what happens as the trade closes at expiration. Stock Falls below $42: If the stock is below $42 at expiration, both call options would be out of the money (OTM) and have zero value. In this scenario, the investor would not be able to recoup any of the initial debit paid ($50 plus commissions and fees). This is the maximum loss scenario. Stock Rises above $43: If the stock is above $43 at expiration, both call options would be in the money (ITM). This would result in the maximum gain, which will be explained shortly.

2011 TD Ameritrade IP Company, Inc.

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Long Call Vertical Spreads

Expiration Results
Stock Ends between $42 and $43: If the stock falls between $42 and $43 at expiration, the $42 strike call is ITM but the $43 strike call is OTM. This means that the $42 strike call has intrinsic value, while the $43 strike call does not. This would result in a gain or loss, depending on the stocks price when the position is closed, and the transaction costs involved to open and close the position, of course. Also, if the investor allows the $42 strike to expire ITM, it would be automatically exercised, and the stock would have to be purchased at $42. Lets explore this strategy further by reviewing the maximum potential gain and loss.

2011 TD Ameritrade IP Company, Inc.

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Long Call Vertical Spreads

Maximum Potential Loss


In the option chain below you will see that the price column lists a 50 net debit. The net debit is figured by taking the long call debit and subtracting the short call credit ($1.30 $0.80).

1. Net Debit: Multiply the net debit by 100 shares of stock (50 x 100 shares) 2. Commissions/Fees: Add the $9.99 commission and $1.50 in option contract fees ($0.75 per contract) Maximum Potential Loss

$50.00

+ $11.49 $61.49

2011 TD Ameritrade IP Company, Inc. Transaction costs are an important aspect of evaluating any trade, and should be considered before proceeding with any trade or trading strategy. Exercise or assignment of an options position incurs a $19.99 fee.

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Long Call Vertical Spreads

Maximum Potential Gain


No matter how high the stock rises, the maximum potential gain is limited. The reason is that a long vertical spread places bookends in a trade and give you a spread value between two strike prices. In this example, the spreads maximum value can only be $1.00 ($43.00 - $42.00). Ultimately, the investors gain is then limited by the difference between the strike prices, minus the initial debit (the net debit includes transaction costs). For this example, the maximum potential loss is as follows: 1. Maximum Spread Value The difference between the strike prices ($1.00 x 100) 2. Maximum Potential Loss The net debit plus commission and fees ($50.00 + $11.49) Maximum Potential Gain Now lets look at a valuable tool in evaluating riskthe risk profile graph.
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$100.00 $61.49 $38.51

Long Call Vertical Spreads

Risk Profile Graph


A risk profile graph is a profit and loss graph for option strategies. These graphs are used to show the range in which an investor will be profitable or incur a loss on a trade. This tool is found in the thinkorswim from TD Ameritrade trading platform (live and paperMoney) and displays two key factors: Stock Price: The underlying stock price is displayed horizontally (x-axis). Maximum Gain/Loss: The option positions profit/loss is reflected vertically (y-axis).

For illustrative purposes only.

2011 TD Ameritrade IP Company, Inc. Maximum potential reward for a debit spread is limited to the difference between strikes, less net premium paid. The maximum loss is the net premium paid and transaction costs.

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Long Call Vertical Spreads

Risk Profile Graph


You can see on the risk profile graph below that the potential gains in a long call vertical spread are limited, as are the potential losses. Once the stock price reaches a certain point (for this example below $42, the long strike price), it turns flat, indicating maximum loss. Conversely, once the stock moves above the short strike price ($43 for this example), the risk profile line turns flat again, indicating maximum gain. Of course, these would need to be modified by transaction costs to arrive at the actual net figure for max gain or max loss.

For illustrative purposes only.

Lets look at another aspect of long vertical spreadsoption probability.


2011 TD Ameritrade IP Company, Inc. Maximum potential reward for a debit spread is limited to the difference between strikes, less net premium paid. The maximum loss is the net premium paid and transaction costs. 35

Long Call Vertical Spreads

Option Probability
Every option strike price has a certain probability of being in the money (ITM) or out of the money (OTM) at expiration. This probability changes as the underlying stock fluctuates and can be viewed on the thinkorswim from TD Ameritrade paperMoney platform and the actual trading platform.

For illustrative purposes only.

This graphic shows the probability of expiring (Prob. Exp) for various call option strikes. The probability of expiring is the probability that the option will be ITM at expiration. Notice that the OTM calls, highlighted in the blue box, have a less than 50 percent probability of expiring ITM. This means they have a greater than 50 percent probability of expiring OTM.
2011 TD Ameritrade IP Company, Inc. 36

Long Call Vertical Spreads

Option Probability
Remember, the goal of a long call vertical spread is for the stock to close above the short strike at expiration. This means both options will be ITM. Keep in mind probability analysis results are theoretical in nature, not guaranteed, and do not reflect any degree of certainty of an event occurring.

2011 TD Ameritrade IP Company, Inc.

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Long Call Vertical Spreads

Long Call Vertical Spreads Objective


Ultimately, the long call vertical spreads objective is for the stock to be above the short strike price at expiration. This objective gives the spread a bullish directional bias. Objective: That the stock stays ABOVE the short strike price at expiration. This completes our review of long call vertical spreads, next we will study long put vertical spreads.

2011 TD Ameritrade IP Company, Inc.

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Long Put Vertical Spreads

Long Put Vertical Spreads

The Basics
A long put vertical spread is constructed by simultaneously purchasing a put option and selling a put option at a lower strike price.

In the long put vertical spread image above, you will see that an investor is Buying a Put: The $43.00 strike put is purchased at $1.30 per share, meaning the investor pays $130.00 ($1.30 x 100 shares of stock) plus transaction costs. Selling a Put: The $42.00 strike put is sold at 85 per share, meaning the investor receives $85.00 ($0.85 x 100 shares of stock) minus transaction costs.
Transaction costs are an important aspect of evaluating any trade, and should be considered before proceeding with any trade or trading strategy. The depiction above does not include transaction costs and is for illustrative purposes only. Transaction costs for trades placed online are $9.99 for stock orders and $9.99 for option orders plus a $0.75 fee per contract. Exercise or assignment of an options position incurs a $19.99 fee.

2011 TD Ameritrade IP Company, Inc.

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Long Put Vertical Spreads

Expiration Results
Now lets see what happens as the trade closes at expiration. Stock Falls below $42: If the stock is below $42 at expiration, both put options would be ITM. This would result in the maximum gain, which will be explained shortly. Stock Rises above $43: If the stock is above $43 at expiration, both put options would be OTM and have zero value. In this scenario the investor would lose the entire debit paid ($45 plus commissions and fees). This is the maximum loss scenario. Stock Ends between $42 and $43: If the stock falls between $42 and $43 at expiration, the $43 strike put is ITM but the $42 strike put is OTM. This means that the $43 strike has intrinsic value, while the $42 strike does not. This scenario could result in a gain or a loss, depending on the stocks price when the position closes and transaction costs. Lets explore this strategy further by reviewing the maximum potential loss and gain.

2011 TD Ameritrade IP Company, Inc.

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Long Put Vertical Spreads

Maximum Potential Loss


In the option chain below you will see that the price column lists a 45 net debit. The net debit is figured by taking the long call debit and subtracting the short call credit ($1.15 $0.85 = $0.45). Knowing this we can figure the maximum potential loss.

1. Net Debit: Multiply the net debit by 100 shares of stock (45 x 100 shares) 2. Commissions/Fees: Add the $9.99 commission and $1.50 in option contract fees ($0.75 per contract) Maximum Potential Loss
2011 TD Ameritrade IP Company, Inc. Transaction costs are an important aspect of evaluating any trade, and should be considered before proceeding with any trade or trading strategy. Exercise or assignment of an options position incurs a $19.99 fee.

$45.00

+ $11.49 $56.49

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Long Put Vertical Spreads

Maximum Potential Gain


No matter how high the stock rises, the maximum potential gain is limited. The reason is that a long vertical spread places bookends in a trade and give you a spread value between two strike prices. In this example, the spreads maximum value can only be $1.00 ($43.00 - $42.00). Ultimately, the investors gain is then limited by the difference between the strike prices, minus the initial debit. For this example, the maximum potential gain is as follows: 1. Maximum Spread Value The difference between the strike prices ($1.00 x 100) 2. Maximum Potential Loss The net debit plus commission and fees ($50.00 + $11.49) Maximum Potential Gain:

$100.00 $56.49 $43.51

Now that we have reviewed the gains and losses (or risks and rewards), lets look at a valuable tool used in evaluating riskthe risk profile graph.
2011 TD Ameritrade IP Company, Inc. 43

Long Put Vertical Spreads

Risk Profile Graph


A risk profile graph is a profit and loss graph for option strategies. These graphs are used to show the range in which the investor will be profitable or incur a loss on a trade. This tool is found in the thinkorswim from TD Ameritrade paperMoney software and displays two key factors: Stock Price: The underlying stock price is displayed horizontally (x-axis). Maximum Gain/Loss: The option positions profit/loss is reflected vertically (y-axis).

For illustrative purposes only.

2011 TD Ameritrade IP Company, Inc. Maximum potential reward for a debit spread is limited to the difference between strikes, less net premium paid. The maximum loss is the net premium paid and transaction costs.

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Long Put Vertical Spreads

Risk Profile Graph


You can see on the risk profile graph below that the potential gains in a long put vertical spread are limited, as are the potential losses. Once the stock price reaches a certain point (in this example, below $42, the short strike price), it turns flat, indicating maximum gain. Conversely, once the stock moves above the long strike price ($43 in this example), the risk profile line turns flat again, indicating maximum loss.

For illustrative purposes only.

Similar to long call vertical spreads, another aspect of the trade is option probability.
2011 TD Ameritrade IP Company, Inc. Maximum potential reward for a debit spread is limited to the difference between strikes, less net premium paid. The maximum loss is the net premium paid and transaction costs. 45

Long Put Vertical Spreads

Option Probability
Every option strike price has a certain probability of being in the money (ITM) or out of the money (OTM) at expiration. This probability changes as the underlying stock fluctuates and can be viewed on the thinkorswim from TD Ameritrade paperMoney platform and the actual trading platform.

For illustrative purposes only.

This graphic shows the probability of expiring (Prob. Exp) for various put option strikes. The probability of expiring is the probability that the option will be ITM at expiration. Notice that the OTM puts, highlighted in the blue box, have a less than 50 percent probability of expiring ITM. This means they have a greater than 50 percent probability of expiring OTM.
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Long Put Vertical Spreads

Option Probability
Remember, the goal of a long put vertical spread is for the stock to close below the short strike at expiration. This means both options will be ITM. Keep in mind probability analysis results are theoretical in nature, not guaranteed, and do not reflect any degree of certainty of an event occurring.

2011 TD Ameritrade IP Company, Inc.

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Long Put Vertical Spreads

Long Put Vertical Spreads Objective


Ultimately, the long put vertical spreads objective is for the stock to end up below the short strike price at expiration. This objective gives the spread a bearish directional bias. Objective: That the stock stays BELOW the short strike price at expiration.

2011 TD Ameritrade IP Company, Inc.

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Long Puts Vertical Spreads

Review
This course introduced the basic components of long vertical spreads. You should now understand how to do the following: Identify the two types of long vertical spreads: long call vertical spread and a long put vertical spread Calculate a long vertical spreads maximum gain and loss Interpret the long vertical spreads risk profile graph The information presented in this course has formed a foundation for options spread trading. Next, you will learn one way to deepen your knowledge of options.

2011 TD Ameritrade IP Company, Inc.

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Your Education Plan

Your Education Plan

Creating an Education Plan


Education isnt an event but an ongoing process. Youve learned the basics of option investing using long call and put vertical spreads, but there is so much more to learn to apply these instruments if you decide they have a place in your overall strategy. One of the best ways to gain this important knowledge is by determining a process to follow called an education plan. Your education plan outlines which courses you choose to help you achieve your investing goals. You may want to learn only a few basic option strategies or perhaps you want to be an options aficionado. If you choose to explore options further, TD Ameritrade and a separate but affiliated education providerInvestools from TD Ameritrade Holding Corp.offer a wide array of courses, webcasts, live events and education resources to help you pursue your investment goals.

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Your Education Plan

Elements of an Options Education Plan


As a TD Ameritrade client, you have access to numerous free courses that are designed to introduce you to a wide array of investing concepts. These courses can help you identify which areas of the financial markets you are most interested in pursuing.

Calendar Spreads Course


If you are considering options as an investment strategy and are looking to learn more, you may want to consider the Calendar Spreads course to learn a little bit more about complex option strategies. Other Resources There are courses on a variety of additional topics as well as webcasts and workshops all available to you for free in the TD Ameritrade Education Center.

2011 TD Ameritrade IP Company, Inc.

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Your Education Plan

Elements of an Options Education Plan


Fee-Based Education
If you are convinced that options are the next important step in your investor education plan, you may want to consider the comprehensive fee-based offerings available through Investools from TD Ameritrade Holding Corporation, a separate but affiliated education provider. Please feel free to visit the Investools site to learn its various courses offerings. Or call an Investools Education Counselor at 1.800.393.5123 to create your fee-based education plan today.

2011 TD Ameritrade IP Company, Inc. Investools does not provide financial advice and is not in the business of transacting trades. Investools Inc. and TD Ameritrade, Inc., member FINRA/SIPC/NFA, are separate but affiliated companies and are not responsible for each others services or policies.

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