Education · Part 2 of 3
Options strategies
Options are the tool YOLO uses most, because they let you know your worst case before you trade. This guide explains the building blocks and the strategies the platform generates.
The two building blocks
- Call option — the right to buy at a fixed price (the strike) until an expiry date. Calls gain value when the price rises.
- Put option — the right to sell at the strike. Puts gain value when the price falls.
Buying an option costs a premium — that premium is the most a buyer can lose. Selling (“writing”) an option collects the premium up front but can carry large risk on its own, which is why YOLO only uses short options inside structures where another leg caps the risk.
Defined risk vs undefined risk
A defined-risk strategy has a mathematical maximum loss, fixed when you open it. Whatever happens overnight, your worst case is known. YOLO favours defined-risk structures and always shows the max loss in pounds before you confirm.
Strategies you will see on YOLO
| Strategy | Market view | How it works |
|---|
| Long call / long put | Strongly up / strongly down | Buy a single option. Max loss = premium paid. |
| Bull call spread | Moderately up | Buy a call, sell a higher-strike call. Cheaper than a lone call; profit capped. |
| Bear put spread | Moderately down | Buy a put, sell a lower-strike put. The mirror image of the bull call spread. |
| Credit spreads | Not beyond a level | Sell a spread to collect premium; profit if price stays your side of the short strike. Max loss = strike width minus credit. |
| Iron condor | Range-bound | A put credit spread below the price plus a call credit spread above it. Profits if price stays in the range. |
| Iron butterfly | Pinned near a level | Like a condor but with the short strikes at the same price — larger credit, narrower sweet spot. |
| Straddle / strangle | Big move, direction unknown | Buy (or sell, capped) both a call and a put. Volatility strategies. |
The numbers on every setup card
- Max loss — the most the position can lose, in pounds. The number to check first, every time.
- Max profit — the best case, also fixed for defined-risk structures.
- Breakevens — the price(s) at expiry where the trade neither makes nor loses money. Marked on every payoff diagram.
- Probability of profit (POP) — a model estimate of how often the trade ends profitable. An estimate, not a promise.
Reading a payoff diagram
Every YOLO setup includes a payoff diagram: the horizontal axis is the underlying price at expiry, the vertical axis is your profit or loss. The shaded red region is where the trade loses (floored at max loss for defined-risk structures), the green region is profit, and the breakeven points are labelled where the line crosses zero.
The greeks, briefly
Option prices respond to more than the underlying price. Four sensitivities — the greeks — describe how:
- Delta — how much the option moves per £1 move in the underlying. Also a rough proxy for the odds it expires in the money.
- Theta — time decay: what the position gains or loses per day as expiry approaches.
- Vega — sensitivity to implied volatility changes.
- Gamma — how fast delta itself changes; high near expiry at the money.
You do not need to manage greeks yourself — the strategy engine selects strikes and expiries using them — but knowing the words helps you read a setup’s rationale.
Next: Risk Management — the discipline that decides whether any of this makes money.
