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 [...]
There are 2 kinds of option trading systems in general; Discretionary and Mechanical. A discretionary option trader follows no specific rules but chooses, enters and exits an option trade using all of his knowledge or gut feeling. A mechanical option trader is one who translates his knowledge of choosing stocks, entry and exit into objective [...]
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. [...]
It is important to remember that the time spread will leave you with several potential positions that can be altered by other options or stock in numerous ways.
There are a number of decisions you must make to clarify your understanding and goals. Being open to a number decisions can be a very good thing [...]
Vertical spreads can have various names. The same vertical spread could be called several different things by several different people. We have used two terms only: vertical call spread and vertical put spread. Each of these two spreads allows for two positions, long and short.
The long vertical call spread is constructed by buying one call [...]
When vertical spreads are mentioned, they quite often come with monikers such as ‘bull’ and ‘bear’. This lends most to think of vertical spreads as directional plays which is true. However, vertical spreads can be used to take advantage of two other potential trading opportunities – time decay and volatility movement.
If you are looking for [...]
Options provide investors and traders with an abundance of strategy alternatives than simply going long the market. However, using options effectively requires that you learn to think in a new way. Join PHLX’s Options Industry Council instructor Joe Frey as he introduces you to options strategies that allow you to participate in a [...]
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An options trading rolling strategy is a strategy where you move your strike point to a new strike point during the month. Rolling basically means moving. In the world of options trading, this movement happens when you move positions from one strike point to another. That can either happen when you move [...]
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 [...]