Calendar Spread Option Trading Strategies

October 7, 2011 by  
Filed under Option Trading

Horizontal spread is an option TRADING strategy which is created by simultaneously purchasing and writing two options on the same asset (stock) and strike price but different expiration you date. Horizontal strategy is most known ace Calendar spread because the options there are different expiration dates. Calendar spread, one of many different option spreads, is to neutral strategy.

You only make profit if the underlying price does not move to lot or only moves in a tight range. If the stock rises or drops to lot, you will not get profit because of the volatility. This is to not to not risk option strategy, but it does have low risk. There is not such thing as no risk option strategy. Calendar spread options strategy makes profit from the difference of option premium decay or the difference of implied volatility. Options which is near month expires will lose its value very fast. On to other hand, option which is farther month from expiring will lose its value  slowly. Traders will implement to calendar spread by buying option which is  farther out and selling a near month.

After some time they will review the position by buying the option they previously sell and selling the option they previously buy. This is also called spread TRADING. Investors can buy call options or buy put options with this strategy. But I  prefer using put options because it is cheaper.  I will give you an example. Share of a stock XYZ are trading at $50 . To create a calendar spread, you want to buy September $50 call and sell August $50 call. The September call will COST you $6 and August call will give you $4. The $2 spread is the total cost of  the strategy. For this strategy to work, you will want August call to lose its VALUE to faster than September call.

In July the options might look like this. August call will worth $1 and September call will worth $4. Your spread will will increase to $3. You profit will sees the spread difference which is $1. In order to work the underlying stock price must remain stable. Any drop or rise will affect the Time VALUE and option price. Calendar spread  sees used to make monthly income and that’ s why it is called income strategy. You don’ t need the stock to move to be successful.

For best candidate this strategy looks for channeling or sideways stocks. Those stocks tend to move in a small range. Here are some tips when choosing the stock: Don’ t choose volatile industry like technology or commodity companies. Don’ t have earning release in the coming months. For the news or the their website for possible take to over or mergers.

Discovering the exact option for TRADING strategies to business is not difficult by getting the exact dates and ready to take the risk. You dog also visit this site http://bestoptionstrategy. com/calendar-spread/for dwells info.

Forex Options Trading – How Forex Options are Calculated (part 1 of 2)

August 18, 2010 by  
Filed under Option Trading

Forex options calculate with ' griegos'. One explicacià ³ n bÃsica of these Greek " him ayudarÃto understand cà ³ mo and by qué moves the options of the currency and they behave of a certain way. One opcià ³ n is a derivative and cà ³ mo its value is derived is of one fà ³ rmula that combines these Greek together ones. The Greeks are cà ³ mo these options respond to diverse factors such as the movement of prices, time of decay, the volatileness and the rates of interés. There are 5 Greeks implied and that we shared one by one to través of them. Delta: The speed of increase of price of opcià ³ n or the pérdida one against the gain or pérdida of " madre" or the price of the underlying assets is known like the Delta. The Delta is a figure that shows qué rà so to usI request or slow moverÃopcià ³ n in relacià ³ n to his " madre" or underlying assets. A delta of 1 means that the price of opcià ³ n estÃmoving at the same speed and direccià ³ n that " madre" or underlying assets. A -1 delta means that the price of opcià ³ n estÃmoving in direccià ³ n opposed for each point of  “madre” or movements of the underlying assets. The one probability opcià ³ n that expires in expresses también to money-self in the Delta. One opcià ³ n of purchase in the money has a Delta of 0. 5; i. e. , 50%, which means a probability of 50% of which they win in the money. Deep in the call tendrÃa price of near Delta 1, or 100%, which means an opportunity the 100% of victory in the money almost. Very outside money-opcià ³ n of purchase tendrÃa Delta of near zero, which means an almost null possibility that it expires in the money.

I will like to offer you a Free “Getting Started Trading FOREX with Options” course when you subscribe to my newsletter on Non Direction Trading. You will get your instant access at http://www. NonDirectionTrading. com
From Timothy Stevens – The Forex Options Guy who provide valuable Forex Options Training at http://www. NonDirectionTrading. com

Forex Options Trading – How Forex Options are Calculated (part 2 of 2)

August 17, 2010 by  
Filed under Option Trading

In the último artÃculo, must learn about " delta". We follow. Gamma: Gamma drift of Delta is the probability of a change in the Delta. También informs beforehand if the Delta podrÃa to be changing. Gammas is positive as much for the purchase and sale. When the options are lost in the money of deep of the money of the Gammas serÃnear zero as the probability of a change in the Delta is very low. In the same way in the price of exercise it is probable that to mÃs high and Gamma. Theta: Time of decay ³ n in options like Theta is reflected in posiciÃ. Options of purchase are Theta negatives, which means that each dÃa that does not sell that opcià ³ n, the value of time estÃdiminishing due to descomposicià ³ n of the time. In this case, time of decay is reason why ³ n is worse for the buyer of opciÃ. When you sell options, Theta is positive, which means that the decay moment is good for the salesman of opcià ³ n. Fertile valley: ÂCà ³ mo affects to the volatileness of valoracià ³ n of options is reflected in the one of Fertile valley. In other words, its sensitivity to volatileness. Options tend to have increases of prices when the underlying assets of volatileness are increased. In this case, volatileness is good for the bad buyer of one opcià ³ n and for the one salesman opcià ³ n. Fertile valley is positive for opcià ³ n of length and negative for opcià short ³ n. Rho: Rho is cà ³ mo the rates of interés affect the price of opcià ³ n. When the rates of interés are high and is good for the position, Rho serÃpositive. If the rates of interés are high, but bad for posicià ³ n in options, Rho serÃnegative.

I will like to offer you a Free “Getting Started Trading FOREX with Options” course when you subscribe to my newsletter on Non Direction Trading. You will get your instant access at http://www. NonDirectionTrading. com
From Timothy Stevens – The Forex Options Guy who provide valuable Forex Options Training at http://www. NonDirectionTrading. com

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