The majority of options traded on . exchanges take the form of what are known as outrights (. the purchase or sale of an option on its own). On the other hand, what the industry terms "complex trades" comprise just a small share of the total volume of trades. It is in this category that we find the "complex" trade known as an option spread .
Using an option spread involves combining two different option strikes as part of a limited risk strategy. While the basic idea is simple, the implications of certain spread constructions can get a bit more complicated.
This tutorial is designed to help you better understand option spreads, their risk profiles and conditions for best use. While the general concept of a spread is rather simple, the devil, as they say, is always in the details. This tutorial will teach you what option spreads are and when they should be used. You'll also learn how to assess the potential risk (measured in the form of the " Greeks " - Delta , Theta , Vega ) involved with the different types of spreads used, depending on whether you are bearish, bullish or neutral.
So, before you jump into a trade you think you have figured out, read on to learn how a spread might better fit the situation and your market outlook. If you need a refresher course on the basics of options and option terminology before you delve any deeper, we suggest you check out our Options Basics tutorial.
tastyworks, Inc. ("tastyworks") has entered into a Marketing Agreement with Simpler Trading ("Marketing Agent") whereby tastyworks pays compensation to Simpler Trading to recommend tastyworks' brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Simpler Trading by tastyworks and/or any of its affiliated companies. Neither tastyworks nor any of its affiliated companies is responsible for the privacy practices of Simpler Trading or this website. tastyworks does not warrant the accuracy or content of the products or services offered by Simpler Trading or this website.
This newsletter service will release one stock options investment idea per month. Frequently, the optimal strategy is trading equity option credit spreads. Maintaining the best options strategies while striving to control risk and mitigate volatility is sought after. Thorough research and investment analysis has accounted for superior returns since this website’s inception. These proprietary strategies are time tested. These strategies have shown documented success year over year . My knowledge of the options industry is second to none. Each year this website take’s pride in outperforming stock market indices. Join the best option trading newsletter today & let’s get to work.
* AUTO-TRADE AVAILABLE THROUGH: