Credit-enjoy a brief period of decay date options spreads

Wednesday, July 27, 2011

All values are made up of two parts. the absolute value and time value. The absolute value is the part of the in-the-money option at the top of the left and the premium represents the time value. Settings for the two-thirds of the time they lost their life during the last trimester. Alternative operators can take advantage of this sale on credit spreads to decay.

Most of the settings are lost on moving closer to the time of the teeth. For this reason, it is reasonable to the seller's preferences with only a few weeks of the end of the remaining. "Naked" options in the sale of the loss risk but is not limited to credit the customer the largest loss since to cap the price of electricity, less the option premium is the difference between the two. Commercial loans means the spreading of sales, and to Me, you have to buy another option is to lower the price of electricity (the largest of the put spread, spread a call). Put the credit is the credit spread and the strategy on a daily basis, the call is declining indicators of the strategy. The great advantage of credit spreads is that has to be 100% right. We have a margin of error.

Suppose we have a bit of a downward trend in today's market. KATASKOPOS at trade in goods, we could sell 129.39 February spread credit call. The prices depend on how the strike, a collection of border that you want the error, how you have formed, and how I want to profit. We can't sell the 18 February from $ 134 to $ 0,37 and buy call on 18 February, $ 136 to ask to give us a clean credit for $ 0.00 $ 0.23, $ 23 per win is the biggest contract. Our loss on the ceiling would be $ 177 (13600-13400-23). This is the risk-return on capital employed,% 12,99 for 4 weeks. Most of the intermediaries required for the trading of this margin is equal to the maximum amount of the loss.

Maturity SPY could still be at $ 134.23 before we can begin to experience the loss and $ 136.23, before we hit our maximum loss. What is the margin of dumping, 4.50% and 6% in 2006.

Note that this commercial strategy, looking for a bit of profit every month when you try to avoid significant losses. 7.7 Times greater than the maximum loss of profit, and you COULD WIN 1 loss trades 7.7 in each trade is with these options, the trading strategy. This is not great. For this reason, it is particularly important to set a Stop loss. Each person should Select their own Stop loss levels and trade rules, they risk basis. Some settings apply the rule to 200% of sellers, it means that if you have sold a spread price increases 200%, shall be suspended. In this example would be if the spread increased by $ 0.23 $ 0,69. The investor should have stopped the spread of $ 46 per person, which is much smaller than the maximum potential loss with the loss of $ 177. Stop loss at this level, you can reduce the winning trade ratio of 7.7 2. You can use these settings to the trading of the tutorial is an excellent way to develop trading strategies.

The original article


View the original article here

0 comments:

Post a Comment