Archive for the ‘option spread trading’ Category
looking to trade a option spread with expiration a least a month after april. what is the best trade. what should be my bid
which one should i buy based on risk vs reward
i only want to risk $1000
i want to buy the 2.5 strike and sell the 5, 7.5 10 12.5 or 15
also the spreads from each month trade at different prices what is the best one to put a bid in that will get executed
<<<what is the best trade.>>>
the one that you understand the best and where the implied volatility is furthest away from your projection of future volatility.
<<<what should be my bid>>>
Probably a penny or two above the difference in the theoretical prices of the two options.
<<<which one should i buy based on risk vs reward>>>
That depends upon your risk-reward profile. Everybody’s is different.
<<<the spreads from each month trade at different prices what is the best one to put a bid in that will get executed>>>
Nearer months are more liquid than more distant months, so the nearer the month the better your chance of having the order filled.
—–
There are no magic rules saying doing this is always better than doing that. If there were, the market would quickly adjust to make this more expensive and/or that less expensive.
If you want to have a good chance of being a profitable option trader you need to learn about options, about implied volatility and about the risk factors, sometimes called the "greeks". These are things you will probably have to read a book to learn. My favorite book on the subject is "Option Volatility & Pricing" by Sheldon Natenberg, but you should scan it before deciding if it is a good book for you.
Aussie Rob’s High Yield Option Scanner takes the time out of finding the possible Bear Call Spread Option Trades. These are a credit spread and taught as share insurance with re-insurance. By teaching with simple terms, you are able to learn how to use the Lifestyle Trader Option Scanner and trade Bear Call Spread Options. To learn more about options trading please visit
http://www.22easy.com
Duration : 0:4:57
Trading a long spread is relatively simple and looks a lot like an ordinary long option position in many ways. In today’s video I will finish our discussion on long vertical spreads by demonstrating a long put spread on Google Inc (GOOG.) 100% free stocks and options education available from http://www.learningmarkets.com.
Duration : 0:8:12
Spread trading is not a jobbing between bid and offer, nor it involves speculation, its a different trading technique as there is one like option trading.
Basically, spread treading for crude oil is a lower risk speculation about relationships between contracts. It’s lower risk because you are long one position and short another position. Those two positions should be correlated (when one makes money the other will lose but hopefully a little less), but not always. It’s still a speculation and you can still lose money.
A time spread is a bet about the relationship of one calendar contract relative to another. For example you might want to buy a contract for peak demand (say June) and sell one during a shoulder season (say October).
Another type of spread is the crack spread where you are making a bet on the relative value of crude oil vs. its constituent products, gasoline and heating oil.
Another type of spread is a BTU spread where you might make a a bet on the relative energy value of crude oil vs. natural gas (or other energy product).
Entering the SPY May IRON CONDOR for a credit of .49 today on APRIL 11 2008. Check out the VIX volatility on this sitting on the 200 for many days and not able to shoot up. This could signal a rise in the markets. Check out the website for decently conservative gains!
April 25th UPDATE: Given the fast up move in the market,this trade was exited today April 25 for a debit of .37…Giving us a net final debit of .12…..That is a profit of 7.947% Less than our expected 10% return…but I’ll take a 8% profit in two weeks anytime! Also, gives me a chance to enter another trade for a 5% profit, so that will be a total of 13%..I have entered in into another SPY trade…check out my updated new video.
Duration : 0:6:16
http://www.sjoptions.com
Sample non-directional trades using a combination of option spreads: Iron Condor, Butterfly, Calendars, etc.
Duration : 0:2:41
Hey guys, I am looking to start doing spread options trading, but I am still confused on what I can and can’t do. I understand that if i buy an option call, I can sell it later, but if I write an option call, can I sell it later? I use optionshouse as my brokerage. Also, do I need a margin account to trade spreads?
Its actually very simple…There are two types of options… puts and calls. There are two things you can do with options. You can buy them or you can sell them. If you buy an option you can sell it back anytime before the expiration date. Assuming it still has some value. If you sell an option you can buy it back anytime before the expiration date.
Now spreads are generally buying and selling at the same time. For example you might buy a 45 april call and sell the 50 april. This would be a debit trade and you can do it as a spread. In other words as a single order executing both the buy 45 and sell 50 in one fell swoop of an order. Later when this spread is selling at a higher price you can then sell the spread back to lock in your profit. This example is commonly referred to as a ‘bull call spread’ . There are many other varieties of spreads. Some target bullish, bearish, and even neutral outlooks. Please see the referenced websites for more great information on option trading.
Regarding your question about margin account. It will depend on your broker. Most brokers will let you do a variety of spreads in any type of an account. That is a better question for your individual broker.
good trading
marko
http://www.themorningedge.com/freelesson/ Debit Call Spread Trading options – free options trading e-course
Duration : 0:3:15
When i buy either put vertical spread, do i make money by hoping the stock will go down? Or do i want the stock to trade within my put spread range? For example, i buy XYZ $100 put option June for $1.00 and sell XYZ put $90 option at $0.50 when the stock is trading at $101. Should i hope that the stock stay between $90-$100 or should i hope for it to drop below $90.
<<<When should i buy option vertical spread?>>>
First, you should not trade options at all until you understand the risks and rewards associated with options, as well as the ways to control the risks. Second, I am assuming you did not ratio the spread. IOW, I am assuming the number of short options equals the number of long options.
As for when you would want to buy a vertical spread, it would be when
(1) you are either bullish or bearish on the underlying and
(2) you believe implied volatility (compared to the volatility the underlying will experience prior to expiration) is either too high or too low. If you do not have a forecast for implied volatility you should trade the underlying instead of options on the underlying,
If you are bullish, you want to buy a call vertical spread.
If you are bearish, you want to buy a put vertical spread.
If you believe implied volatility (IV) is too high, you want to sell the option with a strike closer to the underlying price and buy the option with a strike further away from the underlying price.
If you believe IV is too low, you want to sell the option with a strike further away from the underlying price and buy the option with the strike closer to the underlying price.
If the underlying is a stock use the current price of the stock increased by the risk-free interest rate until expiry less any dividends expected prior to expiry as the underlying price.
<<<When i buy either put vertical spread, do i make money by hoping the stock will go down?>>>
You don’t make any money by hoping anything.
All else being equal, a long put vertical spread will increase in value if the underlying decreases in value.
All else being equal, a long call vertical spread will increase in value if the underlying increases in value.
<<<Or do i want the stock to trade within my put spread range?>>>
At expiration, a long put vertical spread will provide the maximum return in the underlying is below the lower strike price, have a smaller return if the underlying is between the two strike prices, and be worthless if the underlying is above the higher strike price.
At expiration, a long call vertical spread will provide the maximum return in the underlying is above the higher strike price, have a smaller return if the underlying is between the two strike prices, and be worthless if the underlying is below the lower strike price.
Assuming you want the maximum return you do not want the underlying trading between the two strikes at expiration.
<<<For example, i buy XYZ $100 put option June for $1.00 and sell XYZ put $90 option at $0.50 when the stock is trading at $101. Should i hope that the stock stay between $90-$100 or should i hope for it to drop below $90.>>>
Assuming you want to make as much as possible, you want it to drop below $90, but you would rather have it between $90-$100 than above $100.
—————————–
I strongly suggest you read at least one good book about options before trading them.
Vertical Spread Option Trading II p6/6