Category: OPTION SPREAD TRADING

Box spreads – An Easy Options Arbitrage Strategy

box spread

Box spreads are an option trading strategy that involves purchasing a bull-call spread along with a corresponding bear-put spread. The two vertical spreads have the same expiration dates and strike prices. The idea is, that these two vertical debit spreads, each of which is designed to profit when the price of the underlying moves in […]

Bear Call Spread – Trading Calls When You’re Bearish

The bear call spread is an option trading strategy that is employed when you believe that the price of the underlying asset will fall at least moderately in the near term. The bear call spread option strategy is also known as the bear call credit spread since a credit is received when entering the trade. […]

Ratio Call Spread

The ratio call spread is an option trading strategy that is used when the trader believes that the price action in the underlying market will remain within a range that is at or above it’s current position, but won’t go too far north before option expiration date. It is part of the ratio spread family […]

Put Ratio Backspread

The put ratio backspread is an option spread trading setup that falls into the class of strategies designed to take advantage of upcoming price volatility. Being a backspread, it profits from price breakouts. The risk of loss on the trade occurs when the price action of the underlying remains within a consolidation pattern, or returns […]

Backspread Option Strategy

The backspread option strategy covers a number of setups, all designed to profit from volatile market conditions. Backspreads include strategies such as the Long Straddle, Long Strangle and Ratio Spreads where the implied volatility in the short positions¬† is greater than the IV for the long positions. Backspreads are the opposite of frontspreads, which are […]

Iron Condor Setup

The correct iron condor setup can make all the difference between consistently profitable and sometimes winning, sometimes losing, results when using this popular option trading strategy. So why is the iron condor so popular? The main reason would be that it’s a strategy which doesn’t require you to predict the future direction of the underlying. […]

Iron Condor Strategy

The Secret to an Effective Iron Condor Strategy The right iron condor strategy can make all the difference between consistently profitable and sometimes winning, sometimes losing, results when using this popular option trading strategy. So why is the iron condor so popular? The main reason would be that it’s a strategy which doesn’t require you […]

Diagonal Spread

The Diagonal Spread – The Best of Both Worlds The diagonal spread is one variation of option spread trading that has been used most effectively to adjust existing spread positions. It is called by this name because unlike regular vertical spreads where you go long one strike price and short another – the diagonal spread […]

The Double Calendar Spread

A double calendar spread can be either a combination of the strangle or straddle option strategy along with the principles of calendar spread trading. A strangle option is where you simultaneously purchase an equal number of call and put options, but both positions having strike prices that are out-of-the-money at the time of entry. Never […]

Bear Put Spreads

Bear Put Spreads – Profit from Falling Prices What is the difference between bear put spreads and bear call spreads, for example? Do you understand why they are each called by that name? This is all about getting our options trading terminology correct. Here’s how it works. The first word in the phrase indicates your […]

Bear Call Calendar Spread

Using the Bear Call Calendar Spread to Your Advantage The bear call calendar spread is a combination of the option credit spread and calendar spread strategies. It is simply a credit spread but with an expiration date variation. You will have one leg of the position expiring in the front (nearest) month, usually between 30-45 […]

Iron Condor

When To Take Profits on an Iron Condor The iron condor is a favourite among traders because, being a double credit spread, you receive twice the premium but on margin for only one side of the trade. Being a range trading strategy, all you really want is for the underlying to remain within the range […]

Broken Wing Butterfly

Broken Wing Butterfly Options Strategy The Broken Wing Butterfly is a variation of the traditional option butterfly spread. The main difference in the setup of the trade is the choice of strike prices. The difference in outcome is that you are guaranteed to make a small profit if the underlying price action goes one way, […]

Bull Put Credit Spread

Defining the Bull Put Credit Spread The bull put credit spread is an option trading strategy that is normally employed when you are bullish about an underlying stock, index or future. Since you believe the price action in the near term is going north, you use this credit spread strategy to take advantage of option […]

Trading Credit Spreads

Trading Credit Spreads “In the Money” – Some Advantages Trading credit spreads has traditionally been considered a flexible, low risk – but also low return on risk (ROR), option trading strategy. The usual scenario that is presented is one that involves opening both the short and long legs of the spread “out-of-the-money”, in the hope […]

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