- Debit Spreads Explained | The Options & Futures Guide
- Bear Put Spreads | Put Spread Strategy | Power Options
- The Bear Put Spread Options Strategy - Fidelity
- Long Put Spread | Bull Put Spread - The Options Playbook
Cash dividends issued by stocks have big impact on their option prices. This is because the underlying stock price is expected to drop by the dividend amount on the ex-dividend date.. [Read on.]
Debit Spreads Explained | The Options & Futures Guide
For ease of understanding, the calculations depicted in the above examples did not take into account commission charges as they are relatively small amounts (typically around $65 to $75) and varies across option brokerages.
Bear Put Spreads | Put Spread Strategy | Power Options
Today I would like to report on the gains I made last Friday on the trades I told you about that I had placed last Monday in advance of Facebook’s (FB) earnings announcement on May 8. I was fortunate enough for the stock to take a moderate drop after the announcement, and have some thoughts on how I might play the FB earnings announcement in 8 months.
The Bear Put Spread Options Strategy - Fidelity
Vertical spreads allow us to trade directionally while clearly defining our maximum profit and maximum loss on entry (known as defined risk).
While implied volatility (IV) plays more of a role with naked options, it still does affect vertical spreads. We prefer to sell premium in high IV environments, and buy premium in low IV environments. When IV is high, we look to sell vertical spreads hoping for an IV contraction. When IV rank is low, we look to buy vertical spreads to stay engaged and also use it as a potential hedge against our short volatility risk.
Since the maximum loss is known at order entry, losing positions are generally not defended. We always look to roll for a credit in general, and doing so with vertical spreads is usually difficult.
Long Put Spread | Bull Put Spread - The Options Playbook
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A long call vertical spread is a bullish, defined risk strategy made up of a long and short call at different strikes in the same expiration.
Directional Assumption: Bullish
- Buy ITM Call
- Sell OTM Call
Ideal Implied Volatility Environment: Low
Max Profit: Distance Between Call Strikes - Net Debit Paid
How to Calculate Breakeven(s): Long Call Strike + Net Debit Paid
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If the stock price rise above the in-the-money put option strike price at the expiration date, then the bear put spread strategy suffers a maximum loss equal to the debit taken when putting on the trade.
Note: While we have covered the use of this strategy with reference to stock options, the bear put spread is equally applicable using ETF options, index options as well as options on futures.
A little over a week ago, I passed on a pre-earnings trade I had made on Facebook in advance of their May 8 after-market announcement. Essentially, I bought calendar spreads (long side 66Jun67 series and short side 55May67 series) at the 655, and 655 strikes when FB was trading just under $657.