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.

Iron Condor Option Strategy – Risk Management

March 24, 2011 by  
Filed under Option Trading In Lesson 3 of this mini course, we cover risk management. The Iron Condor is a great trade if done properly. If not you can lose your shirt. This video goes over how to protect yourself from harm to increase your chances for a profitable trade

How do I sell or roll out of options strategy for my profits or do I have to wait for it to expire?

March 19, 2011 by  
Filed under Option Trading

I executed a butterfly option strategy and I can’t figure out how to sell it to receive my profit. Whenever I try to sell it, it tries to make me sell one leg at a time and when I try to process the order it tells me that I can’t do it and that I’m doing something wrong. The two options that I get are to trade or roll opt. Can someone please help? Thank you in advance!!!!!!
That makes since that I tried to close out the short leg first. Also, I tried to set it up to where I can set the limit for the price I want to sell it for. Thanks a lot for the info!!! I knew I could sell it before the expiration, just didn’t know why I was getting the error message.
Another quick question, let’s say my lay out is 70, 72. 5, 75, how do I set the price to where I can only sell it for 72. 50 when I try to sell them as a group?? Also, does it charge me to set up this transaction? b/c every time I try to submit now its charging me a fee, whether I’m trying to leg out or sell them all at once.

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