stock trading academy
stock trading academy
There are more than 20 options strategies can be applied, but one of my favorite is Vertical Spread. The importance of the vertical propagation is that you can buy and sell options of the same type (same stock symbol) with expiry date as well, but with different exercise prices.
In the vertical propagation can choose to apply Bull Put Spread, Bear Call spread, Bull Call Spread and Bear put spread. Bull Put Spread or spread Call Bull can be applied when one considers that people are optimistic, that's what the word means bull. And if you think the market is bearish, use the other strategies (expansion Bear Call Spread Bear and sales) that have the word bear.
When the option is more expensive than buying options, there is a network, the credit of this strategy call credit spread vertically. Both Bull Put Spread and Bear Call Spread benefits credits. Therefore, without fail you have money in your pocket immediately click the button on the screen.
The advantage using vertical credit spread is likely to limit lost because of the spread. As an example, if the spread difference is $ 5, loss stop will be $ 500 (every option contract = 100 shares, so multiply by 100). The lower the spread, the better chance of winning to minimize their risks.
My preferred strategy 2.5 uses the spread, for example, to buy or sell a couple of options Exercise price 25 and 22.5, the difference is the extension that is 2.5 in this example.
In addition, selling a spread is usually better than buy a spread. Become a seller that you have the advantage of the time value of options. As you know, when the option price decreases when are close to maturity, as a model of water falling, time is on his side.
For example, if you are selling QQQQ exercise price 45 and buy the exercise price of 43, which has extended $ 2. The sale of $ 0.8 the option exercise price 45 and buying 0.3 million exercise price options to 43 has the credit of $ 0.5. If QQQQ hovers above 45 expiration date, you receive a credit $ 50 ($ 0.5 x 100) to allow both options to be the value.
However, setting a stop loss in the level of the put option, minus the amount of gain, using the example above, the stop loss is at 44.5. Never allow the fall of stock prices beyond the objective of halting the loss, if so, redeem the sold leg and let the leg length purchased. If you really want play insurance reduce losses and close a position when activating the stop loss.
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