This is a list of option strategies which have limited risk (limited maximum possible loss) and limited potential profit. Typical examples are vertical spreads or ladders.
See also option strategies with limited loss and unlimited profit and strategies with unlimited loss and limited profit.
The List
- Bear Call Spread (also Short Call Spread, Credit Call Spread)
- Bear Put Ladder (also Long Put Ladder)
- Bear Put Spread (also Long Put Spread, Debit Put Spread)
- Bull Call Spread (also Long Call Spread, Debit Call Spread)
- Bull Put Ladder (also Short Put Ladder)
- Bull Put Spread (also Short Put Spread, Credit Put Spread)
- Collar
- Covered Call
- Covered Short Straddle
- Covered Short Strangle
- Double Calendar Spread
- Double Diagonal Spread
- Iron Butterfly
- Iron Condor
- Long Box Spread (also Box Spread)
- Long Calendar Call Spread (also Calendar Call Spread)
- Long Calendar Put Spread (also Calendar Put Spread)
- Long Call Butterfly
- Long Call Condor
- Long Diagonal Call Spread (also Diagonal Call Spread)
- Long Diagonal Put Spread (also Diagonal Put Spread)
- Long Put
- Long Put Butterfly
- Long Put Condor
- Protective Call (also Married Call)
- Put Ratio Backspread
- Put Ratio Spread (also Ratio Put Spread, Bear Ratio Spread)
- Reverse Iron Butterfly
- Reverse Iron Condor
- Short Box Spread
- Short Calendar Call Spread
- Short Calendar Put Spread
- Short Call Butterfly
- Short Call Condor
- Short Diagonal Call Spread
- Short Diagonal Put Spread
- Short Put (also Naked Put, Uncovered Put)
- Short Put Butterfly
- Short Put Condor
- Synthetic Covered Call
- Synthetic Covered Strangle
- Synthetic Long Put (also Synthetic Put)
- Synthetic Short Put
Strike Distance and Maximum Loss Size
Note that limited risk does not always mean small risk.
For example, with vertical spreads, maximum loss depends on strike distance: When the long and short strikes are far apart, the risk can be significant.
Strategies with Limited But Large Risk
The above list also includes strategies where the maximum loss is very large yet still limited, such as short put and other strategies which are net short puts, or strategies which are net long the underlying asset, such as covered call or collar.
For these strategies, maximum loss occurs when underlying price drops to zero by the time the option expires (we assume that underlying price can't be negative).