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Chapter 1. Introduction to Options > Memory Tips for Long and Short Calls and P...

Memory Tips for Long and Short Calls and Puts

Step 1 Remember your basic math at school:

+ +=+
+ -=-
- +=-
- -=+


Step 2 Think buying something as a + and selling something as a –, therefore:

Buying a call would be a + +

Selling a call would be a − +

Buying a put would be a +

Selling a put would be a − −

Step 3 Remember your risk profiles:

Where you end up with a + risk profile, the diagonal line will be upward from left to right.

Where you end up with a - risk profile, the diagonal line will be downward from left to right.

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