A Fidelity Investments Webinar

Introduction to Options

BROKERAGE: OPTIONS
 Introduction to Options
Get to know the basics of options investing; learn key terms and concepts
essential for any new options trader.

Buying Options
Understand what to expect when buying options; learn the difference
between calls and puts.

Options Selling Options

Trading Understand what to expect when selling options; learn how to navigate the
risks associated with selling.

Webinar Options Trade Management

Series Now that you’ve placed a trade, learn strategies to manage before, during,
and after its expiration.

Options Pricing
Understand how options are priced and learn how to you can get the best
returns.
2
 BROKERAGE: OPTIONS

What are Options?

Strategies for
Anatomy of an
Trading Options
Options Symbol

Exercise and
Assignment

Agenda
3
What are Options?
 BROKERAGE: OPTIONS

What are Options?

An option is a contract that gives buyers rights and sellers obligations.

Buyer Rights: Seller Obligations:

Can choose to buy or sell 100 shares Obligated to sell or buy 100 shares
(typically) of the underlying security (typically) of the underlying security
up and until the: when called upon up and until the:
Expiration date Expiration date
At the: At the:
Strike price Strike price
For this right, the buyer: For assuming the obligation, the seller:
Pays a Premium/Price Receives a Premium/Price

Two Exercise Styles:

American (Anytime before expiration) vs. European (Only at expiration)

5
 BROKERAGE: OPTIONS

Why Trade Options?

Risk Management Yield Enhancement Leverage

• Individual security • Helps improve • Less money out
and potential returns on individual of pocket
portfolio protection securities • More choices
• Less money out • Helps improve overall
of pocket portfolio returns

6
 BROKERAGE: OPTIONS

Stock vs. Options

Stock Options
• Substantial risk of capital • Leverage with risk limited to
(stock could go to zero) VS premium paid
• Lower break-even • Higher or lower break-even
• Voting rights • Limited life, decaying asset
• Potential dividends • No voting rights or dividends
• Limited strategies • Many strategies (Options give
(Buy stock, sell short stock ) you options)

7 NOTE: Call buyers do not receive cash dividends and do not have voting rights.
 BROKERAGE: OPTIONS

Option Buyer or Option Seller

With options, you can be either a buyer or seller

Option Buyer Option Seller

• Pay a premium/price • Receive a premium/price
• Has the right to Exercise • Has an obligation to buy or sell 100
and buy or sell 100 shares shares of the underlying security at
of the underlying security Assignment
• Also called a call or put holder • Also called a call writer or put
(long the option) writer (short the option)

8 NOTE: Call buyers do not receive cash dividends and do not have voting rights.
 BROKERAGE: OPTIONS

Types of Options

Long Call Long Put

Allows the option holder (buyer) to buy Allows the option holder to sell 100
100 shares (typically) at the strike price shares (typically) at the strike price up
up to the defined expiration date. to the defined expiration date.

Said to be LONG the call. Said to be LONG the put.

Bullish Bearish

Short Call Short Put

Obligate the option writer (seller) to sell Obligate the option writer (seller) to buy
100 shares (typically) of the underlying at 100 shares (typically) of the underlying at
the strike price when exercised. the strike price when exercised.

Said to be SHORT the call. Said to be SHORT the put.

Bearish Bullish
9
 BROKERAGE: OPTIONS

What Happens When a Stock Splits?

Example
You own one contract for XYZ stock with a strike price of $75,
Options can be the company announces a 3 for 2 stock split.
adjusted in a number How is the option contract adjusted?
of ways to account
for corporate events. Old option contract: 100 x $75 = $7,500
These are called
Share conversion: (100 / 2) * 3 = 150
adjusted options.
Price conversion: $75 x 2 ÷ 3 = $50
Other adjustments may occur from
corporate actions. Terms can be found New option contract: 150 x $50 = $7,500
in the option chain, or check with the
Options Clearing Corp to find out the
new terms of an adjusted option .
The number of shares and the strike price are adjusted to maintain
the notional value of the contract post-split, keeping the notional
value the same.

10
 BROKERAGE: OPTIONS

Risk of Buying Options

What’s the trade-off?

Time Leverage
Options have a finite Leverage goes both ways;
expiration date. They will it can hurt as much as it
either expire worthless or be can help.
turned into long or short shares
of the underlying security.

11 NOTE: Call buyers do not receive cash dividends and do not have voting rights.
Anatomy of an
Options Symbol
 BROKERAGE: OPTIONS

Example: Anatomy of an Options Symbol

Plain English Symbol: SPY Jan 21, 2022 Call 208

SPY220121C208
The symbol of Year of the Month of the Day of the C for a Call, The Strike Price
the underlying expiration expiration expiration or P for a Put

Holder (buyer) of this call has the right to BUY 100 shares of SPY at $208 per share at
any time until January 21, 2022.

13
 BROKERAGE: OPTIONS

Premium Components

Premium = Intrinsic Value + Extrinsic Value

An option contract that has intrinsic value is

“in the money.”
An option contract that has no intrinsic value is “out of the
money

14
Exercise and
Assignment
 BROKERAGE: OPTIONS

Exercise and Assignment

What is Exercise? Remember

Exercising a call is when the option holder opts to Long options are exercised,
buy the underlying security at the strike price. while short options are assigned.

Exercising a put is when the option holder opts to

sell the underlying security at the strike price.
If the option has intrinsic value of at least $0.01
at expiration, it will be automatically exercised.
If the option has no intrinsic value at exercise, it will
expire worthless.

16
 BROKERAGE: OPTIONS

Exercise and Assignment

What is Assignment? Remember

Assignment of a call is the option writer A short (sold) option can be
fulfilling their obligation to sell the shares at assigned at any time! Even if
the strike price. it has no intrinsic value.

Assignment of a put is the option writer

fulfilling
their obligation to buy the shares at the strike
price.
An option seller does not choose if/when
assignment will occur. The option buyer
controls
the action; assignment occurs when they
choose
to exercise their option.
17
 BROKERAGE: OPTIONS

Exercise of a Long Call

American Style: Example 1 Remember

An option holder who exercised a long XYZ American Style can be
call at 146 would purchase 100 shares of XYZ exercised at any time.
at $146 per share, or 100 x $146 = $14,600.
If 10 of those contracts were exercised,
the cost for 1,000 shares would be
10 x 100 x $146 = $146,000.
If the option has intrinsic value of
at least $0.01 at expiration, it will be
automatically exercised.

18
 BROKERAGE: OPTIONS

Exercise and Assignment

American Style: Example 2 Remember

Using the same example, what would American Style can be
Assignment look like? exercised at any time.

The seller, assigned on one call, would be

required to deliver 100 shares of XYZ, and
would receive $146 per share, or 100 x
$146 = $14,600.

19
 BROKERAGE: OPTIONS

Exercise and Assignment

American Style: Example 3 Remember

But what if the seller didn’t already own the shares? American Style can be
exercised at any time.
The seller would have to buy them at whatever
price they were trading post-assignment, which
could be higher than $146 per share.
What if XYZ was now trading at $155? It would
now be 100 x $155= $15,500

20
 BROKERAGE: OPTIONS

Exercise and Assignment

American Style: Example 4 Remember

This time, substitute an XYZ 146 put American Style can be
for the call. Now what would Exercise exercised at any time.
of the put look like?
A holder who exercised a long XYZ put would
sell 100 shares of XYZ for $146 per share, and
would receive proceeds of 100 x $146 = $14,600.

21
 BROKERAGE: OPTIONS

Exercise and Assignment

American Style: Example 5 Remember

Using the same example, what would American Style can be
Assignment look like? exercised at any time.

A writer assigned on the one put would be

required to buy 100 shares of XYZ at $146
per share, or 100 x $146 = $14,600.
Once again, remember leverage: A writer
assigned 10 puts would be required to buy
1,000 shares of XYZ stock at $146, or 10 x
100 x $146 = $146,000.

22
 BROKERAGE: OPTIONS

Exercise and Assignment

European Style: Example Remember

You are Long (Own) 1 SPX call with a strike European can only be
of 2440. exercised at expiration.
If your one SPX call were exercised They’re based on an index
because SPX closed at 2441 on expiration, (which cannot be delivered)
you would receive and they are settled in cash.
$100 CASH in your account.
Your option has $1 of intrinsic value times
the multiplier for SPX which is $1 x 100 =
$100.
*The multiplier for index options is “usually $100.”

23
Strategies for
Trading Options
 BROKERAGE: OPTIONS

Review: Strategies for Trading Options

Which strategies
Long Call Long Put are bullish and
which are bearish?

Short Call Short Put

25
 Introduction to Options
Get to know the basics of options investing; learn key terms and concepts
essential for any new options trader.

Buying Options
Understand what to expect when buying options; learn the difference
between calls and puts.

Options Selling Options

Trading Understand what to expect when selling options; learn how to navigate the
risks associated with selling.

Webinar Options Trade Management

Series Now that you’ve placed a trade, learn strategies to manage before, during,
and after its expiration.

Options Pricing
Understand how options are priced and learn how to you can get the best
returns.
26
 Visit the Fidelity
Learning Center

Learn more
about options

Read: Access the Options Strategy Guide

Watch: Check out videos that cover

options basics

Attend: Register for monthly webinars

27
 BROKERAGE: OPTIONS

Glossary
Option
Like stocks, options are financial securities that you can buy or sell. Options give buyers rights, and
sellers an obligation to buy or sell the underlying stocks and other underlying investments. There are
two kinds of options: calls and puts.

Call
The buyer of call options has the right, but not the obligation, to buy an underlying security at a
specified strike price. Essentially, that means if you were to buy call options on a stock, you would
have the right to buy that stock at an agreed-upon price up, and until a specific date. Conversely, the
seller of a call option has the obligation to sell the underlying security at the specified strike price.

Puts
The buyer of put options has the right, but not the obligation, to sell an underlying security at a
specified strike price. Essentially, that means if you were to buy put options on a stock, you would
have the right to sell that stock at an agreed-upon price, up and until a specific date. Conversely, the
seller of a put option has the obligation to buy the underlying security at the specified strike price.

28
 BROKERAGE: OPTIONS

Glossary

Premium
The current market price of an option contract. The option buyer pays the premium and the option
seller receives the premium.

European Style
An option that can only be exercised/assigned at expiration.

American Style
An option that can only be exercised/assigned at any time before the option expires.

29
 Thank Please join us for our
upcoming webinars

You For more information, please visit

Fidelity.com > News & Research > Options

Questions? Contact a Fidelity representative at

877-907-4429

30
 BROKERAGE: OPTIONS

Important Information

Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry a dditional risk.
Before trading options, please read Characteristics and Risks of Standardized Options, and call 800 -544- 5115 to be approved for
options trading. Supporting documentation for any claims, if applicable, will be furnished upon request.

There are additional costs associated with option strategies that call for multiple purchases and sales of options, such as s preads,
straddles, and collars, as compared with a single option trade. Examples in this presentation do not include transaction costs
(commissions, margin interest, fees) or tax implications, but they should be considered prior to entering into any transactions.

The information in this presentation, including examples using actual securities and price data, is strictly for illustrative and
educational purposes only and is not to be construed as an endorsement, recommendation.

Any screenshots, charts, or company trading symbols mentioned, are provided for illustrative purposes only and should not
be considered an offer to sell, a solicitation of an offer to buy, or a recommendation for the security. Investing involves r isk,
including risk of loss.

Technical analysis focuses on market action – specifically, volume and price. Technical analysis is only one approach to analyzi ng
stocks. When considering what stocks to buy or sell, you should use the approach that you're most comfortable with. As with a ll your
investments, you must make your own determination whether an investment in any particular security or securities is right for you
based on your investment objectives, risk tolerance, and financial situation. Past performance is no guarantee of future resu lts.

© 2020 FMR LLC. All rights reserved.

Fidelity Brokerage Services, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

928890.1.2
31
A Fidelity Investments Webinar

Buying Options

BROKERAGE: OPTIONS
 Introduction to Options
Get to know the basics of options trading; learn key terms and concepts
essential for any new options trader.

Buying Options
Understand what to expect when buying options; learn the difference
between calls and puts.

Options Selling Options

Trading Understand what to expect when selling options; learn how to navigate
the risks associated with selling.

Webinar Options Trade Management

Series Now that you’ve placed a trade, learn strategies to manage before,
during, and after its expiration.

Options Pricing
Understand how options are priced and learn how you can help get the
best returns.
33
 BROKERAGE: OPTIONS

Review
Options Basics

Execute a Trade Buy a Call

Buy a
Protective Put Buy a Put

Agenda
34
Review
Options Basics
 BROKERAGE: OPTIONS

Review: Anatomy of an Options Symbol

Example: Plain English Symbol: SPY Jan 21, 2022 Call 208

SPY220121C208
The symbol of Year of the Month of the Day of the C for a Call, The Strike Price
the underlying expiration expiration expiration or P for a Put

Holder (buyer) of this call has the right to buy 100 shares of SPY at $208 per share at
any time until January 21, 2022.

36 Company trading symbols are provided as examples and for illustrative purposes only and should not be considered an offer to sell, a solicitation of an offer to buy, or a recommendation for the security.
 BROKERAGE: OPTIONS

Review: Premium Components

Premium = Intrinsic Value + Extrinsic Value

An options contract that has intrinsic value is

“in the money”
An options contract that has no intrinsic value is
“out of the money”

37
 BROKERAGE: OPTIONS

Review: Bullish or Bearish?

Long Call Long Put

Short Call Short Put

38
Buy a Call
 BROKERAGE: OPTIONS

Buy a Call

Situation Market Forecast Action

XYZ is trading at Bullish on Buy one XYZ APR

$42 a share the stock, but 42.50 call for $2.10
want limited (pay $210)
downside risk

40
 BROKERAGE: OPTIONS

Buy a Call: Profit and Loss Table

Buy One XYZ APR 42.50 Call @ 2.10

PRICE AT EXP OPTION COST VALUE AT EXP PROFIT/(LOSS)

50 2.10 7.50 5.40

45 2.10 2.50 0.40

44.60 2.10 2.10 0 (Breakeven)

42.50 2.10 0 (2.10)

40 2.10 0 (2.10)

37.50 2.10 0 (2.10)

Company trading symbols are provided as examples and for illustrative purposes only and should not be considered an offer to sell, a solicitation of an offer to buy, or a recommendation for the security.
41 Examples do not take into account commissions.
 BROKERAGE: OPTIONS

Buy a Call: Profit and Loss Diagram

+5

Buy One XYZ

APR 42.50 0
Call @ 2.10 40 42.50 45 47.50

–5

Company trading symbols are provided as examples and for illustrative purposes only and should not be considered an offer to sell, a solicitation of an offer to buy, or a recommendation for the security.
42 Examples do not take into account commissions.
 BROKERAGE: OPTIONS

Buying a Stock vs. Buying a Call

Buying a stock Buying a call

• Substantial risk of capital VS • Leverage with risk limited
(stock could go to zero) to premium paid
• Lower break-even point • Higher break-even point
• Limited life, value generally
decreases with time

43 NOTE: Call buyers do not receive cash dividends and do not have voting rights.
Buy a Put
 BROKERAGE: OPTIONS

The Put Buyer

The Put Buyer Risk/Reward Profile

• Has the right to sell the underlying • Risk limited to option premium
stock at an agreed-upon price (the paid plus commission
strike) until the expiration date • Substantial profit potential until
• For this right, the put buyer pays a the option’s expiration
premium

45
 BROKERAGE: OPTIONS

Buy a Put

Situation Market Forecast Action

XYZ is trading at Bearish on Buy one XYZ APR

$42.50 a share the stock, 42.50 put for $2.30
but want (pay $230)
limited risk

Company trading symbols are provided as examples and for illustrative purposes only and should not be considered an offer to sell, a solicitation of an offer to buy, or a recommendation for the security.
46 Examples do not take into account commissions.
 BROKERAGE: OPTIONS

Buy a Put: Profit and Loss Table

Buy One XYZ APR 42.50 Put @ 2.30

PRICE AT EXP OPTION COST VALUE AT EXP PROFIT/(LOSS)

50 2.30 0 (2.30)

45 2.30 0 (2.30)

42.50 2.30 0 (2.30)

40.20 2.30 2.30 0 (Breakeven)

40 2.30 2.50 0.20

37.50 2.30 5 2.70

Company trading symbols are provided as examples and for illustrative purposes only and should not be considered an offer to sell, a solicitation of an offer to buy, or a recommendation for the security.
47 Examples do not take into account commissions.
 BROKERAGE: OPTIONS

Buy a Put: Profit and Loss Diagram

+5

Buy One XYZ

APR 42.50 0
Put @ 2.30 40 42.50 45

–5

Company trading symbols are provided as examples and for illustrative purposes only and should not be considered an offer to sell, a solicitation of an offer to buy, or a recommendation for the security.
48 Examples do not take into account commissions.
 BROKERAGE: OPTIONS

Summary of Buying Options

Buying Calls Buying Puts

• Right to buy • Right to sell
• Long market exposure with • Short market exposure with
risk limited to premium paid risk limited to premium paid
for options plus commissions for options plus commissions
• Can potentially be used to help
protect a single position or an entire
portfolio

49 Note: An options investor may lose the entire amount committed to options in a relatively short period of time.
Buy a Protective Put
 BROKERAGE: OPTIONS

• To limit downside risk potential on a stock you

own, buy a put option on the stock.
• The put owner will then have the right to sell the
stock at an agreed-upon price (the strike price)
Protective Put until the expiration date.
Strategy • There is a second reason to buy a put –
protection.

Is this a bearish or bullish strategy?

51
 BROKERAGE: OPTIONS

• Risk is limited to the option premium paid and

out-of-the-money amount at the time of trade (if
any)
• Can provide limited protection against losses if
Protective Put the stock goes below the strike price
Risk/Reward • We do not have to exercise the put, since we
Profile are the holder and have the choice
• Unlimited profit potential on the stock,
reduced by cost of put

52
 BROKERAGE: OPTIONS

Protective Put Strategy

Situation Market Forecast Action

Long 100 shares Bullish on the stock, Buy one QRS APR 90
of QRS stock but want limited put for $0.95 (pay $95)
at $92 downside risk

Company trading symbols are provided as examples and for illustrative purposes only and should not be considered an offer to sell, a solicitation of an offer to buy, or a recommendation for the security.
53 Examples do not take into account commissions.
 BROKERAGE: OPTIONS

Protective Put: Profit and Loss Table

Long 100 QRS @ 92

Buy one QRS APR 90 Put @ 0.95

PRICE AT EXP STOCK P/(L) PUT P/(L) TOTAL P/(L)

100 8.00 (0.95) 7.05

95 3.00 (0.95) 2.05

92.95 0.95 (0.95) 0 (Breakeven)

90 (2.00) (0.95) (2.95)

85 (7.00) 4.05 (2.95)

80 (12.00) 9.05 (2.95)

Company trading symbols are provided as examples and for illustrative purposes only and should not be considered an offer to sell, a solicitation of an offer to buy, or a recommendation for the security.
54 Examples do not take into account commissions.
 BROKERAGE: OPTIONS

Protective Put: Profit and Loss Diagram

+5
Long QRS @ 92

Long 100
QRS @ 92, 0
Buy One APR 90 85 90 95 100
Put @ 0.95
–5 Breakeven at expiration:
Initial stock price + option premium
92 + 0.95 = 92.95

Company trading symbols are provided as examples and for illustrative purposes only and should not be considered an offer to sell, a solicitation of an offer to buy, or a recommendation for the security.
55 Examples do not take into account commissions.
Execute a Trade
 BROKERAGE: OPTIONS

Before You Place a Trade, Consider…

1 2 3

Buying one call is Consider how Be aware of position

the equivalent of much risk you size to manage
buying 100 shares are comfortable your risk
of stock taking on

57
 BROKERAGE: OPTIONS

Place a Trade on Fidelity.com

News & Research > Options > Option Chain

Start a trade from the

Option Chain
• Easily see all the
available options
• Fully customizable
to meet your needs

58 The screenshot is for illustrative purposes only.

 BROKERAGE: OPTIONS

Place a Trade on Fidelity.com

News & Research > Options > Option Chain

• Easy access to your

balances and positions
• Quickly adjust to
contract specifications

59 The screenshot is for illustrative purposes only.

 BROKERAGE: OPTIONS

Now What?

LONG OPTIONS SHORT OPTIONS

Sell it Buy it back

Fulfill obligation
Exercise it
when assigned

Let it expire Let it expire

60
 Introduction to Options
Get to know the basics of options trading; learn key terms and concepts
essential for any new options trader.

Buying Options
Understand what to expect when buying options; learn the difference
between calls and puts.

Options Selling Options

Trading Understand what to expect when selling options; learn how to navigate
the risks associated with selling.

Webinar Options Trade Management

Series Now that you’ve placed a trade, learn strategies to manage before,
during, and after its expiration.

Options Pricing
Understand how options are priced and learn how you can help get the
best returns.
61
 Visit the Fidelity
Learning Center

Learn more
about options

Read: Access the Options Strategy Guide

Watch: Check out videos that cover

options basics

Attend: Register for monthly webinars

62
 BROKERAGE: OPTIONS

Glossary

Breakeven
The underlying stock price at which an options strategy (or combined stock and options strategy)
has a zero loss and zero gain.

Long Call
With a long call option, the buyer has the right to buy shares of the underlying security at a specific
price for a specified time period.

Protective Put
An options strategy in which a long equity position's unrealized profit is protected by the purchase of
a put option. The option serves as the equivalent of a stop-loss order, giving the trader the right to sell
the equity at the strike price, limiting the diminished profit from a decline in the share price.

63
 Thank Please join us for our
upcoming webinars

You For more information, please visit

Fidelity.com > News & Research > Options

Questions? Contact a Fidelity representative at

877-907-4429

64
 BROKERAGE: OPTIONS

Important Information

Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry a dditional risk.
Before trading options, contact Fidelity Investments by calling 800-544-5115 to receive a copy of Characteristics and Risks of
Standardized Options. Supporting documentation for any claims, if applicable, will be furnished upon request.

There are additional costs associated with option strategies that call for multiple purchases and sales of options, such as s preads,
straddles, and collars, as compared with a single option trade. Examples in this presentation do not include transaction costs
(commissions, margin interest, fees) or tax implications, but they should be considered prior to entering into any transactio ns.

The information in this presentation, including examples using actual securities and price data, is strictly for illustrative and
educational purposes only and is not to be construed as an endorsement, recommendation.

Any screenshots, charts, or company trading symbols mentioned, are provided for illustrative purposes only and should not
be considered an offer to sell, a solicitation of an offer to buy, or a recommendation for the security. Investing involves r isk,
including risk of loss.

Technical analysis focuses on market action – specifically, volume and price. Technical analysis is only one approach to analyzi ng
stocks. When considering what stocks to buy or sell, you should use the approach that you're most comfortable with. As with a ll your
investments, you must make your own determination whether an investment in any particular security or securities is right for you
based on your investment objectives, risk tolerance, and financial situation. Past performance is no guarantee of future resu lts.

© 2020 FMR LLC. All rights reserved.

Fidelity Brokerage Services, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

931140.1.0
65
A Fidelity Investments Webinar

Selling Options

BROKERAGE: OPTIONS
 Introduction to Options
Get to know the basics of options trading; learn key terms and concepts
essential for any new options trader.

Buying Options
Understand what to expect when buying options; learn the difference
between calls and puts.

Options Selling Options

Trading Understand what to expect when selling options; learn how to navigate
the risks associated with selling.

Webinar Options Trade Management

Series Now that you’ve placed a trade, learn strategies to manage before,
during, and after its expiration.

Options Pricing
Understand how options are priced and learn how you can help get the
best returns.
67
 BROKERAGE: OPTIONS

Sell Covered Calls

Sell Cash-
Execute a Trade Secured Puts

Agenda

68
Sell Covered Calls
 BROKERAGE: OPTIONS

What Is a • The covered call seller (writer/shorter) has the

obligation to sell stock (if assigned) at an
Covered Call? agreed-upon price (the strike) up to and until
the expiration date.
Buy stock and sell
calls on a share-for- • In exchange, the covered call seller receives
share basis a premium.
• The covered call seller has the entire downside
risk of the underlying security minus the premium.
• Upside potential is limited to the premium received.

70
 BROKERAGE: OPTIONS

Why Sell • Increase income by the amount of

the premium received minus
Covered Calls? commissions.
Sell a covered call if • Slightly reduce stock price risk
you are neutral to (by the amount of the premium
moderately bullish received minus commission).
on the stock

71
 BROKERAGE: OPTIONS

Covered Call Strategy

Situation Market Forecast Action

Long 100 shares Neutral to Sell one QRS APR 95

of QRS stock moderately bullish call for $1
at $92 on the stock

Company trading symbols are provided as examples and for illustrative purposes only and should not be considered an offer to sell, a solicitation of an offer to buy, or a recommendation for the security.
72 Examples do not take into account commissions.
 BROKERAGE: OPTIONS

Covered Call: Profit and Loss Table

Long 100 QRS @ 92

Sell one QRS APR 95 Call @ 1.00

PRICE AT EXP STOCK P/(L) CALL P/(L) TOTAL P/(L)

100 8.00 (4.00) 4.00

95 3.00 1.00 4.00

91 (1.00) 1.00 0 (Breakeven)

90 (2.00) 1.00 (1.00)

85 (7.00) 1.00 (6.00)

80 (12.00) 1.00 (11.00)

Company trading symbols are provided as examples and for illustrative purposes only and should not be considered an offer to sell, a solicitation of an offer to buy, or a recommendation for the security.
73 Examples do not take into account commissions.
 BROKERAGE: OPTIONS

Covered Call: Profit and Loss Diagram

+5 Long QRS @ 92

Long QRS @ 92,

Sell One 95 Call 0

@ 1.00 90 95 100 105

Break even at expiration:

Initial stock price – option premium
–5 92 – 1 = 91

Company trading symbols are provided as examples and for illustrative purposes only and should not be considered an offer to sell, a solicitation of an offer to buy, or a recommendation for the security.
74 Examples do not take into account commissions.
 BROKERAGE: OPTIONS

Strategy Management

Now What?

1 2 3

Buy to Let It
Roll
Close Expire

75
Sell Cash-
Secured Puts
 BROKERAGE: OPTIONS

What Is a Cash- • The cash-secured put seller has an obligation

to buy stock at strike until expiration.
Secured Put? • The profit potential limited to the
Selling a put and premium received.
simultaneously setting • There is substantial downside risk.
aside cash to fulfill the • The amount of cash necessary to cover
obligation, if assigned the obligation is required.

77
 BROKERAGE: OPTIONS

Why Sell Cash-Secured Puts?

1 2 3
Target a Earn
Earn
buying interest
income
price on cash

78
 BROKERAGE: OPTIONS

Cash-Secured Put Strategy

Situation Market Forecast Action

Have $9,000 cash Neutral to slightly Sell one QRS 90 put for
in account and bullish on the stock $1 (receive $100)
QRS stock trading
at $92 Would like to buy Deposit $9,000 to
stock if the price cover the obligation
dips lower

Company trading symbols are provided as examples and for illustrative purposes only and should not be considered an offer to sell, a solicitation of an offer to buy, or a recommendation for the security.
79 Examples do not take into account commissions.
 BROKERAGE: OPTIONS

Cash-Secured Puts: Profit and Loss Table

Sell 1 QRS APR 90 Put @ 1.00

STOCK PX AT EXP PREMIUM RECEIVED PUT VALUE AT EXP PROFIT/(LOSS)

100 1.00 0 1.00

95 1.00 0 1.00

90 1.00 0 1.00

89 1.00 (1.00) 0 (Breakeven)

85 1.00 (5.00) (4.00)

80 1.00 (10.00) (9.00)

Company trading symbols are provided as examples and for illustrative purposes only and should not be considered an offer to sell, a solicitation of an offer to buy, or a recommendation for the security.
80 Examples do not take into account commissions.
 BROKERAGE: OPTIONS

Cash-Secured Puts: Profit and Loss Diagram

+5 Long QRS @ 92

Long QRS @ 92,

Sell 90 Put @ 0

1.00 85 90 95 100

–5

Company trading symbols are provided as examples and for illustrative purposes only and should not be considered an offer to sell, a solicitation of an offer to buy, or a recommendation for the security.
81 Examples do not take into account commissions.
 BROKERAGE: OPTIONS

Strategy Management

Now What?

1 2 3

Buy to Let It
Roll
Close Expire

82
 BROKERAGE: OPTIONS

Summary of Selling Options

Selling Covered Calls Selling Cash-Secured Puts

• Obligation to sell stock at the strike price • Obligation to buy stock at the strike price
up to and until expiration until expiration
• Downside risk in the underlying security • Profit potential limited to premium received
minus the premium
• Substantial downside risk
• Upside potential is limited
• Amount of cash necessary to cover the
• Income generation obligation is required
• Income generation

83
Execute a Trade
 BROKERAGE: OPTIONS

Before You Place a Trade, Consider…

1 2 3

Buying or selling one Consider how Be aware of position

call is the equivalent much risk you size to manage
of trading 100 shares are comfortable your risk
of stock taking on

85
 BROKERAGE: OPTIONS

Place a Trade on Fidelity.com

News & Research > Options > Option Chain

Benefits of starting
a trade from the
Option Chain
• Easily see all the
available options
• Fully customizable
to meet your needs

86 The screenshot is for illustrative purposes only.

 BROKERAGE: OPTIONS

Place a Trade on Fidelity.com

News & Research > Options > Option Chain

• Easy access to your

balances and positions
• Quickly make
adjustments to
contract specifications

87 The screenshot is for illustrative purposes only.

 BROKERAGE: OPTIONS

Now What?

LONG OPTIONS SHORT OPTIONS

Sell it Buy it back

Fulfill obligation
Exercise it
when assigned

Let it expire Let it expire

88
 Introduction to Options
Get to know the basics of options trading; learn key terms and concepts
essential for any new options trader.

Buying Options
Understand what to expect when buying options; learn the difference
between calls and puts.

Options Selling Options

Trading Understand what to expect when selling options; learn how to navigate
the risks associated with selling.

Webinar Options Trade Management

Series Now that you’ve placed a trade, learn strategies to manage before,
during, and after its expiration.

Options Pricing
Understand how options are priced and learn how you can help get the
best returns.
89
 Visit the Fidelity
Learning Center

Learn more
about options

Read: Access the Options Strategy Guide

Watch: Check out videos that cover

options basics

Attend: Register for monthly webinars

90
 BROKERAGE: OPTIONS

Glossary

Covered Call
A covered call is an options strategy designed to generate income on stocks you own—and don't
expect to rise in price anytime soon. A covered call involves owning shares of the underlying stock
and selling a call (which grants the buyer the right, but not the obligation, to buy that stock at a set
price until the option expires).

Cash-Secured Put
A cash-secured put typically involves selling an at-the-money or out-of-the-money put option, while
simultaneously setting aside enough cash to buy the stock.

91
 Thank Please join us for our
upcoming webinars

You For more information, please visit

Fidelity.com > News & Research > Options

Questions? Contact a Fidelity representative at

877-907-4429

92
 BROKERAGE: OPTIONS

Important Information
Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry a dditional risk.
Before trading options, contact Fidelity Investments by calling 800-544-5115 to receive a copy of Characteristics and Risks of
Standardized Options. Supporting documentation for any claims, if applicable, will be furnished upon request.

There are additional costs associated with option strategies that call for multiple purchases and sales of options, such as s preads,
straddles, and collars, as compared with a single option trade. Examples in this presentation do not include transaction costs
(commissions, margin interest, fees) or tax implications, but they should be considered prior to entering into any transactio ns.

A covered call writer forgoes participation in any increase in the stock price above the call exercise price, and continues t o bear the
downside risk of stock ownership if the stock price decreases more than the premium received.

The information in this presentation, including examples using actual securities and price data, is strictly for illustrative and
educational purposes only and is not to be construed as an endorsement, recommendation.

Any screenshots, charts, or company trading symbols mentioned, are provided for illustrative purposes only and should not
be considered an offer to sell, a solicitation of an offer to buy, or a recommendation for the security. Investing involves r isk,
including risk of loss.

Technical analysis focuses on market action – specifically, volume and price. Technical analysis is only one approach to analyzi ng
stocks. When considering what stocks to buy or sell, you should use the approach that you're most comfortable with. As with a ll your
investments, you must make your own determination whether an investment in any particular security or securities is right for you
based on your investment objectives, risk tolerance, and financial situation. Past performance is no guarantee of future resu lts.

© 2020 FMR LLC. All rights reserved.

Fidelity Brokerage Services, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

93 931149.1.0
A Fidelity Investments Webinar

Options Trade Management

BROKERAGE: OPTIONS
 Introduction to Options
Get to know the basics of options trading; learn key terms and concepts
essential for any new options trader.

Buying Options
Understand what to expect when buying options; learn the difference
between calls and puts.

Options Selling Options

Trading Understand what to expect when selling options; learn how to navigate
the risks associated with selling.

Webinar Options Trade Management

Series Now that you’ve placed a trade, learn strategies to manage before,
during, and after its expiration.

Options Pricing
Understand how options are priced and learn how you can help get the
best returns.
95
 BROKERAGE: OPTIONS

Manage
Options Prior
to Expiration

Position Manage Options

Management at Expiration

Agenda

96
Manage Options
Prior to Expiration
 BROKERAGE: OPTIONS

Manage Options Prior to Expiration

Manage Your Outlook Trader’s View:

• Do you still have the same outlook • Be honest with yourself when
on the security? reevaluating an existing trade
and manage accordingly.
• Has that outlook changed? • Don’t fall into the trap of making
• Were you bullish and are now adjustments without considering
neutral? Bearish? the end objective of the trade.

• Has your time horizon changed?

98
 BROKERAGE: OPTIONS

What Factors Affect the Premium?

Money-ness of the Time to Expiration Expected Movement

Option Being Sold (Expiration Selection) from the Underlying
(Strike Selection) • Nearer term expirations (Implied Volatility)
• Out-of-the-money offer the potential for • Higher implied
options offer lower the highest annualized volatility (expected
premiums, lower return but a lower price movement)
probability up-front premium results in higher
• Longer-dated premiums
• At-the-money
options have the expirations decay at • Lower implied
most time value a slower rate, but have volatility results in
higher premiums lower premiums

99
 BROKERAGE: OPTIONS

Manage Options Prior to Expiration

There are three ways to manage any strategy:

1
Leave the 2
Close 3
Adjust
Strategy Alone the Strategy the Strategy
Makes Sense When: Makes Sense When: Makes Sense When:
You would put the same The strategy no longer The existing strategy can
trade on today aligns with the outlook be altered to better align
with the outlook
• Allow • Trade out of
exercise/assignment the strategy • Reducing position size
• Continue to stay in • Rolling up, down,
the trade or out?

100
 BROKERAGE: OPTIONS

Manage Long Positions Prior to Expiration

Early Exercise Example

You are long (own) one ABC Call expiring this Friday with
Makes Sense When:
a strike of 100. ABC is at 105.
You cannot sell the option
in the open market for at Your ABC contract is currently trading at 4.50 x 5.50 and
least intrinsic (exercise) you wish to close the position.
value.
• Typically, the option is If you sold your contract to the bid, you would only
either very deep receive $4.50. But, if you exercise your option to buy
in the money, close to ABC at $100 and then sell the stock on the open market
expiration, or both for $105, you’d receive the $5.00 difference.

101
 BROKERAGE: OPTIONS

Manage Short Position Obligations

Early Example

Assignment When the underlying pays a dividend, calls have a

higher assignment risk.
• The less time until
expiration, the greater Why? The option may be at or slightly in the money
the risk and only trading for $0.20 of time premium when the
• The deeper in the underlying is paying a $0.50 dividend.
money the option, the
If you are planning on owning the stock,
greater the risk
it would make more sense to exercise the
• Early assignment also option just prior to the ex-dividend date so that you
frequently occurs receive the $0.50 dividend.
around dividends, so
pay special attention

102
 BROKERAGE: OPTIONS

Manage Options Prior to Expiration

What Is Rolling? Reasons Why You Might Want to Roll

Rolling is placing one • Give your outlook more time to play out
trade to simultaneously • Change strike price to lock in gains
close out a current
position and open up a • Lower potential of assignment
new one with either a
different expiration date,
strike price, or both.

103
 BROKERAGE: OPTIONS

Manage Prior to Expiration

Rolling Out
“Rolling out” is placing a trade
to push the expiration to a date
further out.
An investor would consider rolling
out a short option if their outlook
has not changed and they want to
take advantage of additional time.
It’s important to realize that by
rolling out a trade, you are closing
one trade and opening a new one.
Be sure that the new trade makes
sense on its own merit.
• For example, closing one call at
$0.91 and selling a new one for
$2.50
• This is usually done at a net credit
Screenshot is for illustrative purposes only.

104
 BROKERAGE: OPTIONS

Manage Options Prior to Expiration

Rolling Up/Down
“Rolling up/down” is placing a
trade to either increase or decrease
the strike price.
An investor would consider rolling
up a short option if their outlook
has changed and they want to take
advantage of additional stock price
movement.
• For example, closing one call at
$4.00 and selling a new one for
$0.87
• This is frequently done at
a net debit

Screenshot is for illustrative purposes only.

105
Manage Options at
Expiration
 BROKERAGE: OPTIONS

Manage Options at Expiration

At expiration, there are Remember

three possibilities If your option is $0.01 in the
money or more, it will
1
• Close the trade automatically be exercised.
Only allow an option to be
2
• Exercise/Assignment auto-exercised if it is
commensurate with the amount
of shares you would
3
• Expire worthless want to own/sell.

107
 BROKERAGE: OPTIONS

Manage Options at Expiration

How do you close a trade? Remember

• Long option holders simply Some option writers will let their
“sell to close.” This sells your contracts simply expire worthless
right to exercise the option. rather than closing out their contracts.
• Short option writers simply While this enables the trader to pick up
“buy to close.” This closes additional potential profit, it’s
your obligation. frequently referred to as “picking up
pennies in front of a steamroller.”
If the trade suddenly moves against
you, you could be flattened!

108
Position
Management
 BROKERAGE: OPTIONS

Position Management

Have a plan! • Reduce concentrations in individual

positions and sectors
Minimize emotional
decisions through • Keep it small and in proportion to
your portfolio
risk and position
• Go into each trade knowing what you
size management can and are willing to lose
• Be flexible; if your opinion has changed,
then adjust

110
 Introduction to Options
Get to know the basics of options trading; learn key terms and concepts
essential for any new options trader.

Buying Options
Understand what to expect when buying options; learn the difference
between calls and puts.

Options Selling Options

Trading Understand what to expect when selling options; learn how to navigate the
risks associated with selling.

Webinar Options Trade Management

Series Now that you’ve placed a trade, learn strategies to manage before, during,
and after its expiration.

Options Pricing
Understand how options are priced and learn how you can help get the best
returns.
111
 Visit the Fidelity
Learning Center

Learn more
about options

Read: Access the Options Strategy Guide

Watch: Check out videos that cover

options basics

Attend: Register for monthly webinars

112
 BROKERAGE: OPTIONS

Glossary

Rolling Up
Rolling up an option involves buying to close an existing covered call and simultaneously selling
another covered call on the same stock and with the same expiration date but with a higher strike
price.

Rolling Down
Rolling down an option involves buying to close an existing covered call and simultaneously selling
another covered call on the same stock and with the same expiration date but with a lower strike
price.

Rolling Out
Rolling out an option involves closing out an option that is about to expire and simultaneously
purchasing a similar trade with a later expiration date.

113
 Thank Please join us for our
upcoming webinars

You For more information, please visit

Fidelity.com > News & Research > Options

Questions? Contact a Fidelity representative at

877-907-4429

114
 BROKERAGE: OPTIONS

Important Information

Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry a dditional risk.
Before trading options, contact Fidelity Investments by calling 800-544-5115 to receive a copy of Characteristics and Risks of
Standardized Options. Supporting documentation for any claims, if applicable, will be furnished upon request.

There are additional costs associated with option strategies that call for multiple purchases and sales of options, such as s preads,
straddles, and collars, as compared with a single option trade. Examples in this presentation do not include transaction costs
(commissions, margin interest, fees) or tax implications, but they should be considered prior to entering into any transactions.

The information in this presentation, including examples using actual securities and price data, is strictly for illustrative and
educational purposes only and is not to be construed as an endorsement, recommendation.

Any screenshots, charts, or company trading symbols mentioned, are provided for illustrative purposes only and should not
be considered an offer to sell, a solicitation of an offer to buy, or a recommendation for the security. Investing involves r isk,
including risk of loss.

Technical analysis focuses on market action – specifically, volume and price. Technical analysis is only one approach to analyzi ng
stocks. When considering what stocks to buy or sell, you should use the approach that you're most comfortable with. As with a ll your
investments, you must make your own determination whether an investment in any particular security or securities is right for you
based on your investment objectives, risk tolerance, and financial situation. Past performance is no guarantee of future resu lts.

© 2020 FMR LLC. All rights reserved.

Fidelity Brokerage Services, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

930894.1.1
115