By vanko on September 10, 2011
Vertical spreads will trade between its minimum and maximum values – zero and the difference between the two strikes. In the case of a vertical call spread, the spread will trade closer to zero when the stock trades closer to or lower than the lower strike price. The spread will trade closer to maximum value [...]
Posted in Develop Your Skill | Tagged mastery, options, prices, spread, trading
By vanko on December 23, 2010
The selection and management of a vertical spread are only two-thirds of the game. Closing out, rolling or morphing the position has to be analyzed and executed with the same due diligence.
Looking at the closing out of a vertical call spread, we find there are three possible outcomes. The spread can finish out-of-the-money and valueless. [...]
Posted in Develop Your Skill | Tagged mastery, options, position, rolling, the, trading
By vanko on November 21, 2010
In our previous reports, we discussed option strategies that feature the use of options in combination with stock such as the buy-write and the use of options against each other in the form of spreads. We will focus on the Straddle, which uses options in unison with each other.
Unlike a spread that features a long [...]
Posted in Develop Your Skill | Tagged lesson, mastery, options, straddles
By vanko on October 26, 2010
The Strangle is another option strategy that features the use of options in unison with each other. The Strangle is philosophically identical to its ‘cousin’ the Straddle. However, whereas the Straddle has a single strike as its focal point, the Strangle has its focal point spread out over two strikes.
The effect of this as [...]
Posted in Develop Your Skill | Tagged mastery, option, options, strangles, trading
By vanko on October 10, 2010
We are going to put together an imaginary spread scenario and set it in real life events. Consider that, in October, you begin to hear about IJK stock. It looks interesting, so you use a variety of sources to learn about it. (News, charts, outside analysts, Internet research, etc.) From your investigations, you decide that [...]
Posted in Develop Your Skill | Tagged an, imaginary, mastery, options, scenario, spread, trading
By vanko on September 10, 2010
Time spreads can be a profitable investment strategy if you understand the concept of time decay. A time spread is designed to take advantage of the fact that an options decay curve is non-linear, that is, an option’s value does not decay evenly over time. As an option gets closer to expiration, its rate of [...]
Posted in Develop Your Skill | Tagged behavior, mastery, of, options, spread, the, time, trading
By vanko on August 14, 2010
Time spreads, also known as calendar spreads, are an ideal way to take advantage of time decay and changes in implied volatility. Time spread strategy focuses on the movement of time and volatility more than on the movement of the stock. Therefore, it is perfect for when you anticipate stagnant or explosive periods in a [...]
Posted in Develop Your Skill | Tagged construction, mastery, of, options, spread, the, time, trading
By vanko on July 24, 2010
When purchasing a time spread, the investor should pay attention to not only the movement of the stock price, but also the movement of volatility. It plays a very large roll in the price of a time spread, which is an excellent way to take advantage of anticipated volatility movements in a hedged fashion.
Option [...]
Posted in Develop Your Skill | Tagged effects, mastery, of, on, options, spread, the, time, trading, volatility
By vanko on May 11, 2010
Since the Straddle’s profit potential depends on its price from purchase time to expiration, the investor should be aware of the factors that affect the Straddle;s price. Several factors affect a Straddle’s price. The first is, of course, stock price. The stock’s price dictates the value of both components of the Straddle – the call [...]
Posted in Develop Your Skill | Tagged affect, factors, mastery, options, prices, straddle, that, trading
By vanko on March 22, 2010
During the life of a vertical call spread, the spread will trade between its minimum and maximum values (between 0 and the difference between the two strikes). In the case of a vertical call spread, the spread will trade closer to zero when the stock trades closer to or lower than the lower strike price. [...]
Posted in Develop Your Skill | Tagged mastery, options, prices, spread, trading, understanding
