Description
A very well-known
and frequently used
strategy. Often
times it is the
first strategy that
an investor will
use within his/her
investment program.
When to use
When bullish
on XYZ and willing
to accept the strategy's
risk/reward profile.
It offers a great
deal of potential
if opinion is correct.
If wrong, it has
a great deal of
inherent risk.
Risk/Reward
Characteristics
The strategy's
P&L is based solely
on the difference
between the initial
purchase price and
the eventual selling
price.
Break-even
Point: Purchase
price.
Time Decay:
None.
Volatility:
The more volatile
the underlying stock
becomes, the greater
the potential for
larger profits and
larger losses.
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