Option Strategies with Limited Loss and Limited Profit

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

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).

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