RiskAlgo
RiskAlgo
Education
RiskAlgo's Pricer models all of these. This isn't a substitute for understanding the risk yourself before you trade — it's a plain-language starting point for what each structure is for.
A straightforward bet that the underlying moves one way — with the size of the bet, and the risk, shaped by how the position is built.
1 leg
Buy or sell one call or put outright. The simplest directional bet — a long call profits if the stock rises past strike plus premium, a long put if it falls below strike minus premium. Risk on a long position is capped at the premium paid; a short (naked) position can carry much larger, even undefined, risk.
2 legs, same expiry
Buy one option and sell another of the same type at a different strike. Caps both the cost and the maximum profit compared to a single option — a directional bet with risk defined on both sides from the moment you open it.
2 legs, mixed rights
Sell a put and buy a call (or the reverse) at different strikes. Often opened for little cost or even a credit — a strongly directional position, but with the short leg carrying undefined risk if the stock moves hard against it.
Betting on the size of a move, not its direction.
2 legs, same strike
Buy (or sell) a call and a put at the same strike and expiry. Long profits from a big move in either direction; short profits if the stock stays close to the strike through expiration.
2 legs, different strikes
Like a straddle, but the call and put sit at different out-of-the-money strikes. Cheaper to open than a straddle, but needs a bigger move to turn a profit.
Built around how the near-term and longer-dated options decay at different rates.
2 legs, same strike, different expiry
Sell a near-term option and buy a longer-dated one at the same strike. Profits from the near option decaying faster than the far one — a bet on time, held roughly neutral on direction.
2 legs, different strikes and expiries
A calendar with different strikes as well as different expiries — combines a directional lean with the same time-decay dynamic.
Profits if the stock stays inside — or outside — a defined band. The core income and range-bound structures.
3 strikes, 1-2-1 ratio
Long one lower strike, short two at the middle, long one upper — all the same type and expiry. Profits most if the stock lands exactly at the middle strike. Low cost, defined risk, a bet on very little movement.
4 legs, mixed rights
The same payoff shape as a Butterfly, built instead from a short at-the-money straddle protected by long out-of-the-money wings. Opened for a net credit rather than a debit.
4 legs, same type
Like a Butterfly, but the two short strikes are separated instead of stacked at one strike — widens the profitable range at the cost of a smaller maximum profit.
4 legs, mixed rights
A short call spread and a short put spread combined — one of the most widely used income strategies. Profits if the stock stays within the range between the two short strikes through expiration.
3 strikes, uneven width
A Butterfly with uneven wing widths, skewing the risk to remove it entirely on one side — often for a net credit — at the cost of more exposure on the other side.
2 legs, unequal quantity
Buy one option, sell more of another at a different strike (e.g. 1x2), same type. Often opened for a credit, but the extra short contracts carry undefined risk once the stock moves far enough past them.