Options strategy calendar spread,option trading the quintessential qqqs,option strategies - Videos Download

20.03.2015 admin
This happens if the underlying stock price remains unchanged on expiration of the near month options.
The maximum possible loss for the neutral calendar spread is limited to the initial debit taken to put on the spread.
Calendar spreads provide known and fixed maximum loss up, until the expiration of the short option. Anyone who has traded options for a while has a feel for how time decay can eat away at an option's value, especially as expiration gets closer.
The maximum risk is known from the outset of the trade, and is equal to the debit paid for the spread, up until the near-month option that you sell gets to expiration, at which point exposure becomes the risk inherent in the option you buy.
Calendar spreads can be done with calls or puts and, if using the same strikes, put and call calendar spreads are virtually equivalent. Options in nearer-month expirations have more time decay than later months (they have a higher theta). The maximum risk is the $305 we paid (remembering that options contacts come in lots of 100).

Using the same RIMM charts, we see that establishing a spread just before earnings would not have worked out.
In consideration of your time, we'll send the first two chapters of Jon and Pete's latest book, How We Trade Options.
All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, or individual's trading does not guarantee future results or returns. Options positions can in fact profit from time decay, but this entails selling options and can involve significant risk. They profit from a rise in implied volatility and are therefore a low-cost way of taking advantage of low implied volatility options.
This information neither is, nor should be construed, as an offer, or a solicitation of an offer, to buy or sell securities by OptionsHouse. Long calendar spreads provide a limited-risk way to take advantage of time decay inherent in different expiration dates. This is considered a more advanced options strategy, but usually has lower risk and a better probability of profit than outright call or put buying.

After that, you are long an option and your further risk is the entire value of that option.
This should not be considered a solicitation to open an OptionsHouse account or to trade with OptionsHouse. OptionsHouse does not offer or provide any investment advice or opinion regarding the nature, potential, value, suitability or profitability of any particular investment or investment strategy, and you shall be fully responsible for any investment decisions you make, and such decisions will be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.
Calendar spreads also profit from a rise in implied volatility, since the long option has a higher vega than the short option.

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