Bullish Forex Definition
ByBullish Forex Definition
There are more than 20 options strategies can be applied, but one of my favorites is spread vertically. The importance of the extension vertical is that you can buy and sell options of the same type (same stock symbol) with expiration date but different exercise prices well.
In the vertical propagation, you can choose to apply bull put spread, bear call spread, bull call spread and after the broadcast. Bull put spread or bull spread can be applied is when you think the action is bullish, that's what the word means "bull. And if you think the market is bearish, use the methods in another way (Bear Call extension of sales and broadcast) that the word has in it.
When option selling is more expensive than buying options, there is a net credit of this strategy call vertical credit spreads. Both Bull put spread and bear call spread credit. Therefore, no, you do not have money in your pocket immediately click the button on the screen.
The advantage of using vertical credit spreads is that you can limit your loss due to propagation. As an example, if the difference propagation is $ 5, your limit will lose $ 500 (each stock option contract = 100 So, multiply by 100). The lower the spread, the better chance gain to minimize your risks.
My preferred strategy is the widespread use of 2.5, for example, Purchase / Sale of couple of options exercise price of 25 and 22.5, the difference is the extension that is 2.5 in this example.
In addition, the sale of a extension is generally better to buy an extension. Become a seller makes you have the advantage that the time value of options. As you know when the option price is decreasing while approaching maturity, like a waterfall model, time is on their side.
For example, if you are selling QQQQ strike price of 45 years and buy the exercise price of 43 years, has spread $ 2. Sale of option exercise price of $ 0.8 billion of 45 and purchases $ 0.3 billion of option exercise price of 43 which has 0.5 million credit. If QQQQ hovers above 45 until the expiration date, you win the $ 50 credit ($ 0.5 x 100), leaving two options each value.
However, the definition of stop loss at the option sales less the credit of winning, if you use the example above, the stop loss is due to 44.5. Never let the fall of stock prices beyond the objective of halting the loss, if any, to redeem the sold leg and let the leg purchased. If you really want play safe to cut losses and close the off position when the pressure is on.
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