Options are a derivative contract which allows the holder to buy/sell the underlying at a determined price by a certain expiration date.
Options Greeks (delta, gamma, vega, theta) affect contract P/L based on changes in volatility, time, & price.
**Options Strategies Broaden Your Range of Trades**
1/n
Going Long Calls/Puts are the plays most retail traders use (equity trader strategies, higher leverage/lower margin)
The beauty of options is there are many more ways to profit, beyond pure directional bias.
#MomoTwit
Options are a derivative contract which allows the holder to buy/sell the underlying at a determined price by a certain expiration date.
Options Greeks (delta, gamma, vega, theta) affect contract P/L based on changes in volatility, time, & price.
If you have 100 shares of XYZ stock, you could short a call contract, w/ your shares as collateral. Strategy allows you to collect premium.
Either your call expires worthless or it closes ITM. If ITM you sell the shares at the strike price of ur short call
This is where the trader buys a call & put at the same strike price and expiration date. You would do this when u expect a large move outside the expected range in *either* direction
You will lose on this trade if the stock does not move/stays within a range.
The trader is buying OTM call & put with the expectations of a large move. Cheaper than a strangle due to buying OTM. However, the move u need to be profitable may be larger. Your risk is only the premium you paid for the contracts, just like with a straddle
A vertical spread is a two leg strategy. The holder is long one call/put and short a separate strike call/put, both legs will have the same expiration date.
Two major classifications - Debit & Credit spread
Trader is long one contract, short a further out strike. The idea behind this is to cheapen the cost of the trade/cap your risk. However by shorting the further out call, you cap your potential gains.
This trade is most effective when capturing a directional move that is not outside an expected range. Your risk is the premium you pay for this spread.
If you're expecting a large move in one direction, you're better off taking the long call alone imo.
Inverse of a debit spread. Short one contract, long a further out strike. Your risk is the spread between the strike prices minus the premium received.
Below is the P/L graph of a Put credit spread. Bullish directional trade vs put debit spread (bearish).
With a credit spread, you are receiving a premium, but your risk/loss could be larger.
Just like the debit spread, you are taking a directional trade, however you are betting on the neutral/opposing direction since you are short a closer ITM/ATM strike
This is a combination of one OTM call & one OTM put credit spread. You're essentially betting on the underlying stock trading within a range until expiration, usually the expected range.
Ideally you want low volatility to take advantage of the time decay.
Can either think of this as two spreads or combo of short straddle + long strangle. Similar to an iron condor, except your aiming for the underlying to close at a target price by your expiration.
Sell 1C/1P same strike, long 1 OTM Call/1 OTM Put.
The goal of this trade is to take advantage of time and volatility. Here you short the nearer-term option, and long a further out expiration. Both options need to be the same strike, same side, different expirations.
Ideally you choose an ATM strike. Shorter term neutrality to allow the near-term expiration to expire worthless, and then u benefit on the long further out expiration if the price moves higher.
There are many different ways to combine long/short options to trade a multitude of scenarios. Here my goal was to introduce people to some of the common strategies utilized.
Please go out and do your own research on individual strategies
*Accessible Places to Learn More About Options/ Option Strategies*
1. Investopedia
2. TastyWorks/TastyTrade
3. OptionsAlpha (Youtube)
4. My friends @NickDChow and @HappyGTrades both experienced options traders.
Most of all, Google is your friend.
If you wanna delve deeper into options dynamics/higher-level options strategies/derivative markets/gamma exposure, make sure to check out these accounts.
1. @Ksidiii
2. @jam_croissant
3. @bennpeifert
4. @VolatilityWiz
5. @SqueezeMetrics
More from Options
For your understanding https://t.co/U89feuPEhC
Today morning I was bullish looking at SGX Nifty. The first put I sold was 14000 PE.
— itrade(DJ) (@ITRADE191) April 20, 2021
After that market took resistance at R2, then I changed my view. Sold 14650 CE and then even uptill 14300 CE. pic.twitter.com/Bo4La6kJRe
You May Also Like
"I lied about my basic beliefs in order to keep a prestigious job. Now that it will be zero-cost to me, I have a few things to say."
We know that elite institutions like the one Flier was in (partial) charge of rely on irrelevant status markers like private school education, whiteness, legacy, and ability to charm an old white guy at an interview.
Harvard's discriminatory policies are becoming increasingly well known, across the political spectrum (see, e.g., the recent lawsuit on discrimination against East Asian applications.)
It's refreshing to hear a senior administrator admits to personally opposing policies that attempt to remedy these basic flaws. These are flaws that harm his institution's ability to do cutting-edge research and to serve the public.
Harvard is being eclipsed by institutions that have different ideas about how to run a 21st Century institution. Stanford, for one; the UC system; the "public Ivys".
As a dean of a major academic institution, I could not have said this. But I will now. Requiring such statements in applications for appointments and promotions is an affront to academic freedom, and diminishes the true value of diversity, equity of inclusion by trivializing it. https://t.co/NfcI5VLODi
— Jeffrey Flier (@jflier) November 10, 2018
We know that elite institutions like the one Flier was in (partial) charge of rely on irrelevant status markers like private school education, whiteness, legacy, and ability to charm an old white guy at an interview.
Harvard's discriminatory policies are becoming increasingly well known, across the political spectrum (see, e.g., the recent lawsuit on discrimination against East Asian applications.)
It's refreshing to hear a senior administrator admits to personally opposing policies that attempt to remedy these basic flaws. These are flaws that harm his institution's ability to do cutting-edge research and to serve the public.
Harvard is being eclipsed by institutions that have different ideas about how to run a 21st Century institution. Stanford, for one; the UC system; the "public Ivys".
