An investor may establish all of the following positions using index options:

  • Long Calls and Puts
  • Short Calls and Puts
  • Long Spreads and Straddles
  • Short Spreads and Straddles
  • Long and Short Combinations

Index options may also be used to:

  • Speculate on the direction of the market
  • Protect a long portfolio by purchasing puts or selling calls
  • Protect a short portfolio by purchasing calls or selling puts

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Capped Index Options

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