Chapter 6: The Strategy Map (Literacy, Not a Menu)

Options for Operators · Chapter 6 Big idea: Know the zoo so you are not sold the zoo. Default to four tools.

Educational only. Not personalized investment advice. All charts at expiration, toy S=$100 world.

Strategy YouTube is a buffet. This course is a toolbox with four tools on the top tray and a locked drawer of things you can name but rarely use.

Core four (operator default)

1. Covered call — willing seller

Own stock + short call at a happy-sell strike.

Income + soft-cap. Downside is still mostly the stock.

2. Cash-secured put — willing buyer

Short put + cash to buy shares if assigned.

Paid entry. Only if you want the stock at that effective price.

3. Protective put — floor

Own stock + long put.

Insurance cost is the premium. Sleep has a price.

4. Collar — floor financed by cap

Stock + long put + short call.

Defined band. You traded away some upside to pay for the floor.

Building blocks (so the zoo makes sense)

Naked short call: undefined upside risk. Not an income product in this course.

Defined-risk directional literacy

Bull put credit spread

Short higher put + long lower put. Credit if stock stays above short strike. Wings cap the disaster.

Bear call credit spread

Short lower call + long higher call.

Use case in this course: recognize them; rarely prefer them over CSP/CC when you actually want stock decisions.

Volatility shapes (literacy)

Iron condor = short put spread + short call spread. Profit if price stays middle. Influencer favorite. Operator default? No — unless you have a process that survives short gamma on both sides (most students do not).

Classification table (memorize the questions)

For every structure ask:

If max loss is undefined and the pitch is "income," walk away.

See Through It: complexity as product

Four-leg structures look professional. Sometimes they are risk-defined and honest. Sometimes they exist so the pitch can say "defined risk" while the real product is attention and commissions. Complexity is not virtue.

Takeaways

1. Core four: CC, CSP, protective put, collar.
2. Spreads/straddles/condors: literacy first.
3. Naked short call: anti-pattern for income.
4. Always state max loss and stock decision.

Next: assignment reality — when the promise becomes shares.

Chapter 6 Homework — Strategy Map (20 pts)

1. (4) List core four with one-line job each.
2. (2) Why is naked short call an anti-pattern here?
3. (3) For each: covered call, CSP — max gain shape (capped/open) and main leftover risk.
4. (3) Bull put spread vs naked short put: what does the long put wing buy you?
5. (2) Iron condor max profit zone (concept).
6. (4) For long straddle and collar: one sentence each "I would only use this if…"
7. (2) See-Through: how does complexity become a product?