The mechanics of vertical spreads are virtually the same when a trader establishes a bearish position using a debit put spread, except the profit and loss regions are on opposite sides of the breakeven point. In this article, we will examine five potential payoff scenarios involving debit put spreads…
Exploring five possible payoff scenarios for debit call spreads…
Often, I'm asked about complex three- and four-legged strategies such as backspreads, condors and ladders, and I'm happy to discuss them. However, sometimes investors get so wrapped up in exotic strategies that the more basic ones are overlooked. Many strategies, such as basic credit and debit spreads, can be less difficult to trade, and can often be effective at generating small profits, while also helping to manage risk. There are literally hundreds of different types of spreads, covering all sorts of different objectives, with different levels of risk and potential profitability
Using open interest put/call ratios to track options volatility…
Analyzing the factors that determine put/call ratios along with the three major drawbacks of relying on put/call ratios to track options volatility.
Many option traders believe that the CBOE Volatility Index (VIX) can help predict bullish or bearish market sentiment. However, in recent years the VIX has arguably become less effective. Put/call ratios, another market-sentiment statistic, may be a potential alternative. We'll discuss the pros and cons of each of these ways to track volatility.
While VIX options are an exciting new product, it is important to realize just how different VIX options are from other options. What we are talking about is an option on implied volatility, and not on a stock, ETF or index. Unless you are a brilliant mathematician, it kind of gives you a headache just thinking about it…
How to use covered puts to manage your option risk along with a few notes of warning about options & risk…
Risk management is key to a trader's survival. It has often been said that those who survive are not the ones who make the most, but the ones who lose the least. Even the best traders make bad trades, and minimizing losses is one of the most important things you can do to help ensure that you'll survive to trade another day. In volatile markets, this is more important than ever. That's why I'd like to focus on a couple of ways you may be able to use options to reduce or limit your risk…
How to select the proper strike price and strategy to put your options to work…
How to put long and naked short puts to work for your portfolio…
How to put long calls and naked short calls to work for you…