Strategy & Trade Construction

Curriculum

16 live sessions

Each session includes a learning objective, practical work, and a competency demonstration. Session titles below are the full syllabus.

1. 01From Market View to Option Structure

   What you learn. Learn how to translate a market thesis into an option structure. Distinguish direction, magnitude, timing, and volatility assumptions, and understand how each dimension affects the choice of strategy. Learn why the same market view can be expressed through multiple structures with materially different risk and reward characteristics.

   Practical work. Given several market theses, identify the directional view, expected timing, anticipated magnitude, and relevant volatility assumption. Compare multiple option structures that could express each thesis and map their principal risks.

   Competency. Given a market thesis, define the required strategy characteristics and construct a suitable option structure. Explain why the chosen structure matches the thesis and identify the principal way the trade could fail.

2. 02Long Calls and Puts: Timing and Exit Strategies

   What you learn. Build on the long-option foundation by learning how to manage an open long call or put. Understand profit-taking, loss management, time-based exits, thesis invalidation, and the effect of changing volatility and time to expiration. Learn why being directionally correct does not automatically mean the trade should remain open.

   Practical work. Analyze open long-call and long-put positions at different points in their life cycle. Define potential profit-taking, stop, time, and thesis-invalidation exits and compare the consequences of closing versus continuing to hold.

   Competency. Given an open long option and a changing market scenario, determine what information should drive the management decision and defend a close, hold, or exit decision based on the original thesis, remaining time, volatility, and risk.

3. 03Covered Calls: Income and Obligations

   What you learn. Understand the covered call as a combined stock-plus-short-call position. Learn how the short call changes the portfolio's upside, premium income, break-even, and assignment exposure. Understand effective sale price and the difference between receiving premium and creating a capped upside obligation.

   Practical work. Construct covered calls at different strikes and expirations. Calculate premium received, effective sale price, break-even, maximum opportunity cost, and outcomes when the stock falls, remains unchanged, or rises through the strike.

   Competency. Given a stock position and several available calls, construct a covered call and explain the income, downside exposure, upside limitation, assignment consequences, and conditions under which the strategy is inappropriate.

4. 04Cash-Secured Puts: Systematic Income

   What you learn. Understand the cash-secured put as a defined commitment to potentially purchase stock at the strike. Learn premium income, effective entry price, break-even, assignment, and downside exposure. Understand why premium received does not eliminate the underlying downside risk.

   Practical work. Construct cash-secured puts at multiple strikes and expirations. Calculate effective entry price and expiration outcomes and model what happens when the underlying falls below the strike and assignment occurs.

   Competency. Given a stock thesis and available puts, construct a cash-secured put and explain the effective entry price, maximum downside exposure, assignment outcome, and conditions under which selling the put does or does not fit the thesis.

5. 05Wheel Strategy

   What you learn. Understand the Wheel as a sequence of cash-secured puts and covered calls rather than as a single independent strategy. Learn how assignment moves the position from the put stage to the covered-call stage and how repeated premium collection changes the position's economics. Understand the circumstances in which the Wheel can accumulate unwanted directional or concentration risk.

   Practical work. Run a complete simulated Wheel cycle from cash-secured put through assignment and covered call. Track capital commitment, premiums, effective stock cost, covered-call income, assignment, and cumulative P&L.

   Competency. Given a simulated Wheel position at different stages, explain the current exposure, identify the next possible transition, calculate the relevant economics, and identify when continuing the cycle would create an unacceptable underlying or portfolio exposure.

6. 06Protective Puts: Portfolio Insurance

   What you learn. Understand the protective put as an insurance overlay for an existing stock position. Learn how strike and expiration determine the protection level, cost, break-even, and duration of the hedge. Understand the trade-off between paying for protection and retaining upside participation.

   Practical work. Construct protective puts at multiple strikes and expirations for the same stock position. Compare hedge cost, protected level, break-even, and outcomes under moderate and severe declines.

   Competency. Given a stock position and a specified downside-risk objective, construct a protective-put hedge and explain the protection level, cost, remaining upside, expiration risk, and circumstances under which the hedge should be adjusted or replaced.

7. 07Collar Strategy: Risk Management

   What you learn. Understand the collar as a combination of a long underlying position, protective put, and short call. Learn how the short call can offset part of the put's cost while creating an upside cap. Understand the trade-offs among protection, cost, upside participation, and assignment.

   Practical work. Construct collars using different put and call strikes. Compare net premium, protected downside, capped upside, break-even, and expiration outcomes.

   Competency. Given a stock position and a specified risk-management objective, construct and defend a collar, explaining exactly what downside is protected, what upside is surrendered, the net cost or credit, and the remaining risks.

8. 08Spread Selection Matrix: Credit vs Debit

   What you learn. Understand the fundamental distinction between debit and credit vertical spreads. Learn how market direction, expected magnitude, time horizon, volatility, maximum risk, maximum reward, and break-even influence the choice of spread. Understand that receiving a credit does not automatically mean lower risk.

   Practical work. Compare debit and credit verticals under the same bullish and bearish theses. Calculate maximum profit, maximum loss, break-even, capital requirement, and expiration outcomes.

   Competency. Given a market thesis and a set of vertical-spread alternatives, select an appropriate debit or credit structure and defend the choice using risk, reward, probability, timing, and volatility considerations.

9. 09Bull Call and Bear Call Spreads

   What you learn. Understand the construction and payoff mechanics of bull call and bear call spreads. Learn how buying and selling calls at different strikes creates a defined-risk vertical and how strike selection determines maximum profit, maximum loss, and break-even.

   Practical work. Build bull call and bear call spreads using real option chains. Calculate their payoff profiles, break-evens, maximum profit, and maximum loss across a range of underlying prices.

   Competency. Given a bullish or bearish thesis, construct the corresponding call spread and correctly explain its risk/reward profile, break-even, maximum profit, maximum loss, and conditions for expiration profit.

10. 10Bull Put and Bear Put Spreads

    What you learn. Understand the construction and payoff mechanics of bull put and bear put spreads. Learn the distinction between credit and debit put spreads and how strike selection affects risk, reward, break-even, and management requirements.

    Practical work. Build bull put and bear put spreads using real option chains. Calculate credit or debit, maximum profit, maximum loss, break-even, and expiration outcomes.

    Competency. Given a bullish or bearish thesis, construct the appropriate put spread and explain the position's cash flow, maximum profit, maximum loss, break-even, assignment considerations, and management triggers.

11. 11Spread Risk, Management, and Execution

    What you learn. Understand the practical risks of trading multi-leg spreads. Learn how bid/ask spreads, slippage, legging risk, partial fills, liquidity, and rapid market movement can affect actual execution. Understand why the theoretical payoff of a spread is not the same as the executable result and establish rules for when a spread should be modified, closed, or abandoned.

    Practical work. Examine multi-leg option chains and simulate spread orders under different liquidity conditions. Compare theoretical mid-price execution with conservative executable prices and analyze partial-fill scenarios.

    Competency. Given a multi-leg spread and real or simulated market conditions, assess execution quality, identify material slippage and fill risks, determine whether to proceed or abort, and explain how execution affects the trade's actual risk/reward.

12. 12Put–Call Parity and Time Value Disparity

    What you learn. Understand put–call parity as the fundamental relationship linking calls, puts, the underlying, strike, interest rates, dividends, and time to expiration. Learn how intrinsic and time value contribute to call and put premiums and why the relative time values of otherwise comparable calls and puts are constrained by parity. Understand that apparent richness or cheapness must be evaluated against the full parity relationship and carrying factors.

    Practical work. Use matched call and put contracts with the same strike and expiration to calculate intrinsic value, time value, and the parity relationship. Examine how changes in the underlying, interest rates, dividends, and time affect the relationship.

    Competency. Given matched call and put prices, the underlying, strike, expiration, and relevant carry inputs, explain whether the prices are consistent with put–call parity, calculate the relative time values, and explain what an apparent time-value disparity does—and does not—imply about a trade opportunity.

13. 13Risk Reversals and Synthetic Exposure

    What you learn. Understand the risk reversal as a combination of a long option and a short option with different strikes. Learn how combinations of calls and puts can create exposure that resembles a synthetic long or short stock position. Understand the economic relationship between synthetic exposure and the underlying without treating theoretical parity relationships as automatically executable arbitrage.

    Practical work. Construct bullish and bearish risk reversals and compare them with equivalent directional stock exposure. Decompose each leg and identify the resulting directional, upside/downside, and assignment exposures.

    Competency. Given a risk-reversal structure, explain the exposure created by each leg, identify whether the combined position is directionally equivalent to long or short stock exposure, and explain the practical risks that remain despite the theoretical relationship.

14. 14Poor Man's Covered Call (PMCC)

    What you learn. Understand the PMCC as a long-dated option combined with a short nearer-term call. Learn how the structure attempts to create covered-call-like exposure with an option replacing the stock position. Understand the differences from a conventional covered call, including diagonal exposure, assignment, expiration mismatch, volatility sensitivity, and the risk of treating the LEAPS option as equivalent to stock.

    Practical work. Construct PMCCs using different LEAPS and short-call strikes. Compare the structure with a conventional covered call in terms of capital, upside, downside, time decay, volatility exposure, and management.

    Competency. Given a bullish long-term thesis, construct a PMCC and explain why each leg was selected, the maximum defined risk where applicable, the short-call obligation, the principal failure modes, and how the position differs from owning the underlying.

15. 15Strategy Selection Rehearsal

    What you learn. Integrate the strategies covered in Course 2 without introducing new structures. Learn to select among long options, covered calls, cash-secured puts, Wheel, protective puts, collars, verticals, risk reversals, and PMCCs based on thesis, risk tolerance, timing, volatility, capital requirements, and management constraints.

    Practical work. Work through a series of market scenarios in which several strategies could plausibly be used. For each scenario, compare at least two structures and identify their different risk/reward characteristics and failure modes.

    Competency. Given a market thesis and multiple candidate strategies, select a structure, reject the alternatives for explicit reasons, and defend the decision using direction, timing, volatility, risk, capital, execution, and management considerations.

16. 16Strategy Selection Laboratory and Course Exam

    What you learn. Integrate the complete Course 2 framework into real trade construction. Learn to move from a market thesis to a specific strategy, contract structure, execution plan, and management framework while recognizing the trade-offs between competing structures.

    Practical work. Complete a full strategy-selection case using an unfamiliar market scenario and option chain. Construct the chosen position, calculate its key risk/reward characteristics, identify execution considerations, and define management and failure rules.

    Competency. Given a market thesis, current option-chain information, and several possible structures, construct and defend the selected strategy. Explain why it fits the thesis, how the structure behaves, the maximum and principal risks, execution considerations, management triggers, and the circumstances under which the trade should not be taken.