Options basics

The holder of a call/put option (the long side) has the right to buy/sell the underlying stock at the agreed (strike) price from/to the seller (the short party, or the writer) before the agreed time in the future called maturity. To acquire this right, the buyer pays the seller a price for the option, known as premium. European options can be exercised only at maturity. American can be exercised any time before maturity. Most options in America are of course American. Unlike stocks, options trade in contracts of 100 calls or puts - that’s the minimum size that you can trade.
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<K2 [typo fixed here] are the respective strikes. As a “homework”, I’d like you to figure out the maximum amount that can be made or lost on a spread trade, and to payoff profile of a spread trade. Если всё это ясно на 100%, пжста отметьтесь в комментариях, или поставьте лайк. Если нет, то напишите свои ответы для самопроверки. Ну и конечно самое время задать вопросы прежде чем мы перейдем к сути дела.

Exercise

There is no doubt that the Fed will cut rates on Wednesday, we just don't know whether it will be 25 or 50 basis points. Look at data presented in the second tweet below and design an options strategy to profit from this. Pros need not bother. Learners - please don't be shy. Comments are not screened.

Markets will be watching to see if the Fed can avoid a recession into 2025.

Historically speaking, the S&P 500 returns +15% within a year of the 1st rate cut if there is no recession.

If there is a recession, the S&P 500 loses *15% in the first year, on average. pic.twitter.com/l6pb09fzss

— The Kobeissi Letter (@KobeissiLetter) September 16, 2024