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Basic Risk Profiles Summary

These are the four charts you need to remember. If you just remember the long call option risk profile, you should be able to construct the other three basic option positions. When you are comfortable with these and the logic behind them, you’ll be ready to look at spreads and combinations with ease.

The Four Basic Risk Profiles for Options

The four basic risk profiles

Here are the four basic risk profiles. Notice how each one is a mirror of another. See if you can deduce which one is which, and I’ll explain them all on the next page.

The four basic risk profiles explained

See how each strategy is the opposite of each of the others, both from a logical and a visual point of view. Once you’re familiar with these four pictures, you can combine them to create new strategies.

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