A bear call spread is a limited profit, limited risk options trading strategy that can be used when the options trader is moderately bearish on the underlying security. It is entered by buying call options of a certain strike price and selling the same number of call options of lower strike price (in the money) on the same underlying security with the same expiration … [Read more...]
Put BackSpread Option- Explained
Put back spreads are great strategies when you are expecting big downward moves in already volatile stocks. The trade itself involves selling a put at a higher strike and buying a greater number of puts at a lower strike price. The put backspread is a strategy in options trading whereby the options trader writes a number of put options at a higher strike price (often … [Read more...]
Long Put Option- Explained
A put option (usually just called a "put") is a financial contract between two parties, the writer (seller) and the buyer of the option. The buyer acquires a short position with the right, but not the obligation, to sell the underlying instrument at an agreed-upon price (the strike price). If the buyer exercises his right to sell the option, the seller is obliged to buy it at … [Read more...]
Short Call -Option Trading
You short a call when you write (sell) a call that you don't currently own. There are two basic types of short calls covered and uncovered (naked). The investor writing Call options should firmly believe that XYZ is not going up! XYZ doesn't have to go down, but it most definitely cannot go up. This is because the strategy's break-even point at expiration is a certain distance … [Read more...]
Protective Put Option – Option Trading
A put option purchased for an underlying security that is already owned by the holder of the option. A protective put defends against a drop in the share price of the underlying security. A protective put strategy is usually employed when the options trader is still bullish on a stock he already owns but wary of uncertainties in the near term. It is used as a means to protect … [Read more...]