A typical calendar spread is the sale of a shorter-term option and the purchase of a longer-term one. These spreads often offer the average investor the chance to sell overpriced short-term premium with relatively little risk. We'll kick things off by looking at a simple long at-the-money calendar spread…

A typical calendar spread is the sale of a shorter-term option and the purchase of a longer-term one. These spreads often offer the average investor the chance to sell overpriced short-term premium with relatively little risk. We'll kick things off by looking at a simple long at-the-money calendar spread…

With the "diagonal backspread," you buy longer-term options and sell a lesser number of nearer-term options that are more in-the-money. Diagonal backspread opportunities often exist in volatile, relatively high premium markets, such as we have been experiencing. With the call diagonal backspread, you can take advantage of the fact that in nervous markets, the nearer-term lower-strike options become steeply overpriced, while the longer-term higher-strike options tend to remain fairly priced.

How to trade diagonal spreads with puts and how to use diagonal spreads as alternatives to covered calls…

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You create a diagonal spread when you buy and write options (calls or puts, but not both in the same spread) on the same stock with different strike prices and different expirations. As we will show in the examples in this article, diagonal spreads can be used as capital efficient covered call alternatives…

In an earlier article, we showed you how you can hedge your stock with "collars," (combinations of covered calls and protective puts). This week, we show how you can hedge your equity portfolio with a bear option spread. This particular hedge is attractive in times such as these when the demand for nominally cheap insurance is driving up the price of the lower strike puts.

Taking another look at Theta, Vega & Rho