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Course Content
Options Fundamentals
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Call and Put Options Explained
Options Pricing and Greeks
Exercise and Assignment Process
Basic Options Strategies
In 2026, the most successful retail traders have moved away from "gambling" on high-leverage options and instead use Basic Options Strategies to create consistent cash flow and protect their existing portfolios.Here are the four essential strategies that form the foundation of a professional options toolkit.1. Covered Call (The Income Generator)This is the most popular strategy in 2026 for long-term investors. You sell a call option against shares you already own.Setup: Own 100 shares of a stock + Sell 1 Out-of-the-Money (OTM) Call.The Goal: To collect the Premium (cash) from the buyer while waiting for the stock to rise.The Outcome:Stock stays flat/down: You keep the shares and the cash.Stock hits the Strike: you sell your shares at a profit and keep the cash.Best For: Generating "synthetic dividends" on stocks you plan to hold anyway.2. Cash-Secured Put (The "Buy at a Discount" Strategy)Instead of buying a stock at the current market price, you get paid to wait for a better price.Setup: Have enough cash to buy 100 shares + Sell 1 OTM Put.The Goal: To get paid a premium to commit to buying a stock at a lower price (Strike Price).The Outcome:Stock stays above Strike: You keep the cash and try again next week.Stock drops below Strike: You are "assigned" the shares at the lower price you wanted, and your effective cost is even lower because of the premium you kept.3. Long Call & Long Put (The Directional Bets)These are the simplest forms of options trading, used to profit from a specific price move without owning the underlying asset.Long Call: You buy a call because you believe the price will go up significantly. It offers unlimited profit potential with limited risk (the premium paid).Long Put: You buy a put because you believe the price will go down. This is often used as "Insurance" to protect a portfolio during a market crash.4. Strategy Comparison TableStrategyMarket SentimentPrimary GoalRisk ProfileCovered CallNeutral to Slightly BullishIncome GenerationMedium (Stock can still fall)Cash-Secured PutNeutral to Slightly BullishBuy Stock CheaperMedium (Stock can still fall)Long CallAggressively BullishLeverage / ProfitLow (Only lose premium)Long PutAggressively BearishProfit / ProtectionLow (Only lose premium)5. The "Wheel" Strategy (The 2026 Professional Workflow)Many 2026 traders combine these into a cycle known as The Wheel:Sell Cash-Secured Puts until you are assigned shares.Once you own the shares, sell Covered Calls until the shares are called away.Repeat. This allows you to collect premiums at every stage of the market cycle.2026 Tactical Note: In today's high-volatility environment, professional traders typically look for 30–45 Days to Expiration (DTE). This provides the best balance between capturing Theta (Time Decay) and giving the trade enough time to work.💡 Student ExercisePick a "Blue Chip" stock (like Apple or Tesla). Look at the options chain for 30 days from now.How much cash would you receive today for selling a Covered Call 5% above the current price?If you did this every month, what would your "annual yield" be from premiums alone?
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Covered Calls and Cash-Secured Puts
Long Calls and Puts
Options vs Stock Trading
Advanced Strategy Combinations
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Spreads and Straddles
Iron Condors and Butterflies
Calendar and Diagonal Spreads
Risk Management and Psychology
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Position Sizing for Options
Managing Winners and Losers
Avoiding Common Options Mistakes
Course Overview: Options Trading Masterclass

In 2026, Calendar and Diagonal Spreads are the “architectural” plays of the options world. While standard vertical spreads bet on price, these strategies bet on the difference in time (Theta) and volatility (Vega) between two different expiration dates.

1. Calendar Spreads (The “Time” Play)

A Calendar Spread (also called a “Time Spread”) involves selling a short-term option and buying a longer-term option at the same strike price.

  • The Setup: Sell a “Weekly” Call + Buy a “Monthly” Call (same strike).

  • The Logic: Options that expire sooner lose their value (Theta) faster than options that expire later. You are essentially “renting out” a short-term contract while owning the long-term “property.”

  • The Goal: You want the stock to stay right at the strike price until the short-term option expires worthless.

  • The Benefit: Since you own a longer-dated option, you can sell another short-term option the following week, creating a recurring income stream.

2. Diagonal Spreads (The “Hybrid” Play)

A Diagonal Spread is a mix of a Vertical Spread (different strikes) and a Calendar Spread (different dates).

  • The Setup: Sell a short-term, Out-of-the-Money (OTM) Call + Buy a long-term, In-the-Money (ITM) Call.

  • The “Poor Man’s Covered Call” (PMCC): This is the most famous diagonal. Instead of spending $20,000 to buy 100 shares of stock, you buy a deep ITM “LEAPS” call (expiring in 1–2 years) and sell weekly calls against it. It mimics a Covered Call but requires about 60-80% less capital.

3. Comparison: Time vs. Price

Feature Calendar Spread Diagonal Spread
Strikes Same Strike Price Different Strike Prices
Expirations Different Dates Different Dates
Primary Driver Theta (Time Decay) Delta (Price) + Theta
Market View Neutral / Flat Moderately Bullish or Bearish
2026 Use Case Profiting from low volatility “Synthetic” stock ownership (PMCC)

4. Why Use These in 2026?

I. Exploiting the “Vol Skew”

In 2026, short-term volatility is often higher than long-term volatility. By selling the “expensive” short-term volatility and buying the “cheaper” long-term volatility, you gain a mathematical edge.

II. High-Interest Rate Environments

Since these are typically Debit Spreads (you pay to enter), they are sensitive to Rho. However, the income generated from the short-term “sold” legs often offsets the cost of carry in a high-rate market.

III. Capital Preservation

The Diagonal Spread (PMCC) allows 2026 retail traders to participate in the upside of expensive stocks like Amazon or Chipotle without tying up massive amounts of liquidity that could be used elsewhere.

5. The Risks: What to Watch For

  • Early Assignment: If the stock rockets past your short strike, you might be assigned early. In a Diagonal, you must ensure your long call is deep enough ITM to cover the cost of the assignment.

  • Vega Risk: These trades are “Long Vega.” If market-wide volatility collapses (e.g., after a major election or Fed meeting), the value of your long-term option may drop even if the stock price doesn’t move.

💡 Pro Tip: The “Roll”

The magic of Calendars and Diagonals is the ability to “Roll” the short leg. If the short-term option you sold is about to expire, you buy it back for pennies and sell a new one for the following week. This is how you “whittle down” the cost of your long-term position until it becomes essentially “free.”

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