Name Covered call Protective put Bull spread We think price will Be unchanged Fall Rise slightly Bear spread (calls) Fall slightly Bear spread (puts) Fall slightly Butterfly spread (calls) Straddle Fall or rise but won’t be too volatile Fall or rise but won’t be too volatile Fall or rise sharply Reverse straddle Be unchanged Zero cost* collar Irrelevant - we want to lock in current portfolio value Irrelevant - we want to earn risk free rate Butterfly spread (puts) Box spread strategy Purpose Generate income Portfolio insurance Benefit from small amount of upside Benefit from small amount of downside Benefit from small amount of downside Bet on low volatility Bet on low volatility Bet on high volatility without predicting which way the volatility will be (up or down) Bet on low volatility, generate income Lock in current portfolio value Earn risk free rate regardless of what end underlying price is Strategy Buy underlying, write call Buy underlying, buy put Buy call (low exercise price), write call (higher exercise price) Buy call (high exercise price), write call (lower exercise price) Buy put (high exercise price), write put (lower exercise price) Buy one call (high exercise price), buy second call (low exercise price), write two calls (medium exercise price) Buy one put (high exercise price), buy second put (low exercise price), write two puts (medium exercise price) Buy call and buy put with same exercise price Write call and write put with same exercise price Buy underlying, write call, buy put ideally with put strike less than call strike (Covered call + protective put) Buy call (low exercise price), write call (high exercise price), write put (low exercise price), buy put (high exercise price) (Bull spread with calls+ bear spread with puts) *CFA only covers a collar where premium earned = premium paid = zero cost This means we can ignore call and put premiums