Building an options strategy

In this guide we build an options strategy. Under the box, open the Create a strategy in Options menu: the first item is Build a strategy. The question comes ready, but you can also write it in your own words. Here we ask for a bull put spread on Nvidia, thirty days out. Then press Send.

The answer explains the strategy. The legs: you sell the put with a strike of one hundred eighty and buy the one at one hundred seventy-five, which acts as protection. That way you collect a credit up front. This button expands the panel. At the top are the key numbers: max profit, about two hundred sixty dollars; max loss, about two hundred forty; and the breakeven, around one hundred seventy-seven forty. Below are two charts with the same price scale. On the left, the Nvidia chart. On the right, the risk and reward chart: across, you see how much you make or lose, depending on where the stock is. The K lines are the two strikes, one hundred eighty and one hundred seventy-five. BE is the breakeven. Today Nvidia is at around one hundred seventy-five dollars, just below the breakeven. Above the breakeven is the green zone, where you make money: above one hundred eighty you keep the whole credit. Below it is the red zone, where you lose: but under one hundred seventy-five the loss stops, because the put you bought protects you. The black line is the result at expiry. The colored lines show the result before expiry: today, and in the days that follow. To change the strikes or the expiry, just ask in the chat. For example: use the December fourth expiry, or move the strikes lower. The chat rebuilds the strategy and the chart.

To sum up: ask for the strategy, read the max profit, the max loss and the breakeven, and use the chart to see where you make money and where you lose.