# A strategy-selection matrix

**OPT-21 · Core Options · Core**

**Lesson question:** How do you compare alternatives without memorizing recipes?

Original fictional examples; educational writing, not live market data, orders or production approval.

## By the end

- Explain the mechanism in the lesson question.
- Reproduce the worked comparison and recognize its failure case.

**Prerequisites:** OPT-F01, OPT-F02, OPT-F03, OPT-F04

A useful matrix starts with the market view, expected magnitude, timing, volatility and acceptable risk shape. It directs the reader to fully priced examples rather than declaring one strategy best for every bullish or neutral opinion.

Strategy families overlap, and their current Greeks can change.

## Understand the mechanism

A moderate bullish target can fit a debit vertical; uncapped calls preserve larger upside at higher premium. A neutral terminal view can fit a condor but does not establish that the credit pays adequately for tail risk. A calendar is a relative-time structure, not a fixed terminal range bet.

Income structures retain ownership or assignment exposure. Short volatility is not synonymous with low risk.

## Walk through the process

Compare at least two structures under the same scenario. Read their complete tickets, then terminal payoff, interim risk and management. Reject structures whose timing or obligations do not fit.

The matrix is navigation, not an automated recommendation.

## Contract and decision boundary

Terminal examples use simultaneous intrinsic realization of all stated legs, before unspecified costs. Actual American exercise, assignment, early liquidation and broker handling can create different interim cash needs. These fictional comparisons are education, not orders or personalized investment advice.

## A worked example

At fictional expiry 103, a long 100 call costing 4.20 loses 120 per contract, while a 100/105 bull-call vertical costing two earns 100. At 112 they earn 780 and 300 respectively.

The payoff comparison reveals what capped upside buys: lower cost and a different hurdle, not superiority in every state. The graph gives the two scenario outcomes for the call; the worked text gives the vertical comparison.

## Graph: A strategy-selection matrix—worked comparison

**Horizontal:** Underlying at common expiry (USD)  
**Vertical:** Long-call terminal P/L (USD)

Fictional data from the written example. The chart organizes the comparison; its shape is not a forecast.

Complete numerical data are embedded in `scripts/options-strategies/OPT-21.js` and displayed as an accessible table in the HTML lesson.

## What would invalidate the reading?

Selecting by a strategy label without inspecting premiums, expiry and units can express a different view from the intended one.

## Check your understanding

### Why can the debit vertical outperform the call at 103 but not 112?

**Answer:** It costs less but caps upside.

**Why:** The sold leg funds part of the debit and limits later participation.

### What is the critical failure to avoid?

**Answer:** Selecting by a strategy label without inspecting premiums, expiry and units can express a different view from the intended one.

**Why:** Explain this risk before treating the example as a decision rule. A correct calculation does not guarantee a favorable market outcome. **Critical risk check.**

## Takeaway

Return to the question: How do you compare alternatives without memorizing recipes? State the observed facts, the assumptions and the failure condition separately.

## References and provenance

The cited references support definitions and conventions. The teaching prose, tickets and numerical scenarios are original; they are not attributed as historical market observations.

- [OCC Options Disclosure Document](https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document)

- [OIC Strategy Reference](https://www.optionseducation.org/strategies/all-strategies-en)