Option Trading or options trading is a term used in trading of the stock options in an exchange. Options Trading implies that you trade the options offered on these stocks, instead of trading stocks. Therefore, there is no need for you to own the underlying stock so that you can trade options. In this field, there are two types of options, namely the call options and put options. If you can creatively utilize both, you have great chances of attaining almost unlimited mixture of potential option strategies. With great strategies for options trading, you can profit from both types, even if the underlying stock is flat.
As an option trader, there is no need for you to employ the buying low and selling high tactics just to generate profits when a trade is closed out. Instead, there are still so many ways to earn money through certain types of spread trades.
A new type of spread trade is the ‘bear call credit spread’; this kind of option trade is able to generate net income in the beginning of the trade; with things going smoothly, this also permits the trader to maintain and keep all net proceeds until the options run out.
What exactly is bear call credit spread? This option trading term is in fact an appealing and accurate explanation of this fairly simple trade. Dissecting every word would give Bear implying a bearish stance; meaning that the stock is becoming low until the end of the trade. Next is the Call, which is a usually called call option, used in taking the position in contrast to put options. The credit word stands for the generation of net income through trade when it is started. Lastly, the Spread implies that trading is taking a stand between the two strike prices where in the difference between the two strike prices is the spread.
Putting all the words together, bear call credit spreads are seeking ways to generate income through the bearish charts. While the spread part might limit the total income as it limits the total risk. Generation of income is possible when there is/are call option/s sold for a higher price compared to the price wherein the call option is acquired. The net difference between the prices is the credit, which is usually not free from risk.
In this option, never let small losses become big losses. To avoid it, choose wisely the right stock before entering the trade.
Jeff Ziegler, author of this article is also interested in Credit spread options and recommends you to please check out some Credit spread strategies if you liked reading this information.
Tuesday, September 28, 2010
Bear call credit spread explained
Options trading is a term frequently used in trading of stock options in an exchange market. Option trading is about trading the options that are offered on these stocks. In this field involving money, options can be classified in to two different types; and they are the put options and call options. By cleverly utilizing both classes, you are giving yourself better chances of getting almost limitless combination of the potential strategies for option trading. With option trading and some strategies, you can earn money.
In the field of exchange market and as a trader, you have so many alternative ways to earn or generate income, not just the typical way wherein you buy stocks at low price then sell it at high price. One way is the so-called bear call credit spread. To clearly know what does the term means, defining it word for word would be best:
• Bear – this term refers to the stance the trader has. The stance is called bearish. In this situation, trader typically identifies the trend as moving down, and it will do worse and remain flat all through out the trade.
• Call – in comparison to put options, trader now makes a call option as his or her position.
• Credit – implies that the trade is able to generate net income especially when the trade is started in. This is the opposite of many trades that typically start through a cash outlay or debit.
• Spread – this is the price difference between the two strike prices. The trader must take his or her position about the spread.
Combining all the terms, you can see that this term is a series of events in option trading. Bear call credit spread seeks to create income by trading the bearish charts. Spread is the one responsible for the limitation of total income as well as the total risk. Generation of the net income is done when a single call option has been sold for higher price in comparison to that of the call option, which is bought before selling. The credit comes from the net difference in the price.
The bear call credit spread technique is an option trade method that is able to generate net income while a trade is happening. Given the right conditions, you can keep all the net profit until the expiration of the options.
Jeff Ziegler, author of this article is also interested in Credit spread options and recommends you to please check out some Credit spread strategies if you liked reading this information.
In the field of exchange market and as a trader, you have so many alternative ways to earn or generate income, not just the typical way wherein you buy stocks at low price then sell it at high price. One way is the so-called bear call credit spread. To clearly know what does the term means, defining it word for word would be best:
• Bear – this term refers to the stance the trader has. The stance is called bearish. In this situation, trader typically identifies the trend as moving down, and it will do worse and remain flat all through out the trade.
• Call – in comparison to put options, trader now makes a call option as his or her position.
• Credit – implies that the trade is able to generate net income especially when the trade is started in. This is the opposite of many trades that typically start through a cash outlay or debit.
• Spread – this is the price difference between the two strike prices. The trader must take his or her position about the spread.
Combining all the terms, you can see that this term is a series of events in option trading. Bear call credit spread seeks to create income by trading the bearish charts. Spread is the one responsible for the limitation of total income as well as the total risk. Generation of the net income is done when a single call option has been sold for higher price in comparison to that of the call option, which is bought before selling. The credit comes from the net difference in the price.
The bear call credit spread technique is an option trade method that is able to generate net income while a trade is happening. Given the right conditions, you can keep all the net profit until the expiration of the options.
Jeff Ziegler, author of this article is also interested in Credit spread options and recommends you to please check out some Credit spread strategies if you liked reading this information.
Option trades that generate income for you – bear call credit spread
Isn’t it nice that when you venture in the field of the exchange market, you can generate money immediately while not having to worry about the risk? That is right; there are some option trade strategies that can give you great profit while minimizing the risk. With it, the option traders do not have to stay using the typical purchasing low and then selling it high just to get a profit after the trade is closed out. As an alternative, there are certain types of spread trade strategies that are able to generate income, and some of these stances can profit from the stocks or indices that are bearish. One of the strategies is the bear call credit spread.
A bear call credit spread is an option trade strategy created to generate net income at the underlying trade. As a trader, you can keep all net proceeds until the expiration of the options especially if the situation favors you.
The term for this type of options spread is a precise and accurate connotation of this somewhat simple yet efficient trade. To fully understand this spread option, one should comprehend every word and its meaning. The bear is the stance of the trend, which is bearish. In this stance, the trend is down or flat. As a trader, you have to take a position by doing call options (this is the opposite of put option). You generate net income through credit when the trade is started. Normally, trades begin using a debit or cash outlay. With the spread, you are taking a stance between the two strike pieces. Spread is popularly known as the difference between two strike prices.
Bear call credit spreads goal is to earn income with bearish trades. The spread can limit the total income; on the other hand, the spread also limits the total risk you may have. You can generate income when you have sold one of the call options for a higher price in comparison to the price of the other call option that is bought. Finally, credit is the net difference; however, it is not free from risk.
For a successful bear call credit spread strategy, you should remember that the small losses you may have should not become big losses. To avoid problems, you must choose the right stock before entering the trade. You can train first by doing paper trading before you commit to real capital.
Jeff Ziegler, author of this article is also interested in Credit spread options and recommends you to please check out some Credit spread strategies if you liked reading this information.
A bear call credit spread is an option trade strategy created to generate net income at the underlying trade. As a trader, you can keep all net proceeds until the expiration of the options especially if the situation favors you.
The term for this type of options spread is a precise and accurate connotation of this somewhat simple yet efficient trade. To fully understand this spread option, one should comprehend every word and its meaning. The bear is the stance of the trend, which is bearish. In this stance, the trend is down or flat. As a trader, you have to take a position by doing call options (this is the opposite of put option). You generate net income through credit when the trade is started. Normally, trades begin using a debit or cash outlay. With the spread, you are taking a stance between the two strike pieces. Spread is popularly known as the difference between two strike prices.
Bear call credit spreads goal is to earn income with bearish trades. The spread can limit the total income; on the other hand, the spread also limits the total risk you may have. You can generate income when you have sold one of the call options for a higher price in comparison to the price of the other call option that is bought. Finally, credit is the net difference; however, it is not free from risk.
For a successful bear call credit spread strategy, you should remember that the small losses you may have should not become big losses. To avoid problems, you must choose the right stock before entering the trade. You can train first by doing paper trading before you commit to real capital.
Jeff Ziegler, author of this article is also interested in Credit spread options and recommends you to please check out some Credit spread strategies if you liked reading this information.
Bull put credit spread explained
Options or option trading is a term used in an exchange market wherein an option is traded instead of stocks. There are so many ways to earn money and be successful in options trading. For example, you can use the bull put credit spread. This strategy is a bullish stance wherein you will want the price of the stock to remain higher than the upper strike price of the spread.
Normally, a credit spread includes writing an option, as well as buying an option in different strike prices that are in the similar underlying security. The position of the spread trade you have sold is the one responsible for giving you a credit going in your trading account. Then, the option you have bought acts to limit your risk.
Finally, when dealing with credit spread trades, you are typically collecting more money on the position that you have written. Definitely, you will want both options involved here in your spread to expire worthless in order for you to achieve maximum profits, and so you can keep the initial credit.
The bull put credit spread strategy is created for you to realize the profit through making cash, which is a net credit created by the difference in a sold put and a bought put. If the stocks are going up, you can keep the net credit.
How to do the bull put credit spread strategy? First, it involves the selling of a put. After that, you have to buy another put at a lower price than the selling price. This gives downside protection.
You should also know the maximum risk in this tactic; it can be calculated by getting the difference between the two strike prices and then deducting the net credit. In addition to that, you should also determine your maximum profit, which is known to be the net credit. You will only realize your profit if the option expires worthless.
Jeff Ziegler, author of this article is also interested in Credit spread options and recommends you to please check out some Credit spread strategies if you liked reading this information.
Normally, a credit spread includes writing an option, as well as buying an option in different strike prices that are in the similar underlying security. The position of the spread trade you have sold is the one responsible for giving you a credit going in your trading account. Then, the option you have bought acts to limit your risk.
Finally, when dealing with credit spread trades, you are typically collecting more money on the position that you have written. Definitely, you will want both options involved here in your spread to expire worthless in order for you to achieve maximum profits, and so you can keep the initial credit.
The bull put credit spread strategy is created for you to realize the profit through making cash, which is a net credit created by the difference in a sold put and a bought put. If the stocks are going up, you can keep the net credit.
How to do the bull put credit spread strategy? First, it involves the selling of a put. After that, you have to buy another put at a lower price than the selling price. This gives downside protection.
You should also know the maximum risk in this tactic; it can be calculated by getting the difference between the two strike prices and then deducting the net credit. In addition to that, you should also determine your maximum profit, which is known to be the net credit. You will only realize your profit if the option expires worthless.
Jeff Ziegler, author of this article is also interested in Credit spread options and recommends you to please check out some Credit spread strategies if you liked reading this information.
Risk control tactic: bull put credit spread
As the title implies, trading credit spreads makes it possible for you to lower the risk in trading options. At the same time, you may assuming a very advantageous stance in the market.
One of the spread tactics is called bull put credit spread; this one uses a bullish bias, and it is made with put options. This is a bullish stance wherein you only want the stock price to remain at the top of the upper or higher strike price of the spread. As a summary, this kind of strategy is able to give you a profit by creating a net credit, which is formed in the difference of the sold put price as well as the bought put price. You, as an investor, may be able to keep the net credit or the difference in the premiums while the stock is going up.
A credit spread can give you a good probability of earning profit, since the profit will be derived as long as the market moves either flat or up.
This strategy includes selling or writing an option and then purchasing an option. You do this in different strike prices while you are in the same underlying stock. Selling an option will give you a credit that will go directly to your trading account. The option you purchase acts as the risk limiting factor.
Take note that in a credit spread trade, you are collecting additional money on your stance that you write. For you to get maximum possible profits, both options that are involved in the spread must expire ‘out-of-the-money’, or worthless.
Bull put credit spread is executed by doing the following:
• Sell a put with a pre-determined price.
• Purchase a put with one or more strikes under the above amount in the same month. This is your downside safety.
• You should know some of the basics like the margins. In addition to that, knowing also the maximum risk, maximum profit, net credit and break even points.
• You will gain profit if the stock prices go up.
Jeff Ziegler, author of this article is also interested in Credit spread options and recommends you to please check out some Credit spread strategies if you liked reading this information.
One of the spread tactics is called bull put credit spread; this one uses a bullish bias, and it is made with put options. This is a bullish stance wherein you only want the stock price to remain at the top of the upper or higher strike price of the spread. As a summary, this kind of strategy is able to give you a profit by creating a net credit, which is formed in the difference of the sold put price as well as the bought put price. You, as an investor, may be able to keep the net credit or the difference in the premiums while the stock is going up.
A credit spread can give you a good probability of earning profit, since the profit will be derived as long as the market moves either flat or up.
This strategy includes selling or writing an option and then purchasing an option. You do this in different strike prices while you are in the same underlying stock. Selling an option will give you a credit that will go directly to your trading account. The option you purchase acts as the risk limiting factor.
Take note that in a credit spread trade, you are collecting additional money on your stance that you write. For you to get maximum possible profits, both options that are involved in the spread must expire ‘out-of-the-money’, or worthless.
Bull put credit spread is executed by doing the following:
• Sell a put with a pre-determined price.
• Purchase a put with one or more strikes under the above amount in the same month. This is your downside safety.
• You should know some of the basics like the margins. In addition to that, knowing also the maximum risk, maximum profit, net credit and break even points.
• You will gain profit if the stock prices go up.
Jeff Ziegler, author of this article is also interested in Credit spread options and recommends you to please check out some Credit spread strategies if you liked reading this information.
Bull put spreads explained
In an exchange market, you will have several means to earn profit. Most people know the basics such as in stocks trading. They will say that when the economy is at its low stages, you better rack up your stocks. Meaning, you have to buy stocks while the price is low. To earn, you have to sell those stocks at higher price and when the market and is moving up. In short, that is like planting the seeds in times of problem and then harvesting in times of abundance. That is a typical trading tactic.
Another term in the field of trading is the bull put spreads. This method is an independent trade that is known to utilize a combination of two put options; however, the whole thing or process is still under the one direction strategy. Under normal circumstances, a trader can sell a single put option and then buy another at a lower strike price. The spread comes from the strike price difference of the two puts.
How to create or make a bull put spread? Fist, you must identify the trend of the market. Then if it is bullish, sell an out of the money put while simultaneously purchasing a put option at a lower strike price for protection. The goal is for both to expire worthless.
Since this technique involves money, expect that there are risks as well as rewards in using put spreads. First, is the risk involved in put spreads; typically, the risk is limited to the difference between the sold put and the purchased put, less the maximum credit. On the other hand, the reward in this bull put spreads is somewhat limited to the initial credit, which is made when you enter the trade.
Jeff Ziegler, author of this article is also interested in Credit spread options and recommends you to please check out some Credit spread strategies if you liked reading this information.
Another term in the field of trading is the bull put spreads. This method is an independent trade that is known to utilize a combination of two put options; however, the whole thing or process is still under the one direction strategy. Under normal circumstances, a trader can sell a single put option and then buy another at a lower strike price. The spread comes from the strike price difference of the two puts.
How to create or make a bull put spread? Fist, you must identify the trend of the market. Then if it is bullish, sell an out of the money put while simultaneously purchasing a put option at a lower strike price for protection. The goal is for both to expire worthless.
Since this technique involves money, expect that there are risks as well as rewards in using put spreads. First, is the risk involved in put spreads; typically, the risk is limited to the difference between the sold put and the purchased put, less the maximum credit. On the other hand, the reward in this bull put spreads is somewhat limited to the initial credit, which is made when you enter the trade.
Jeff Ziegler, author of this article is also interested in Credit spread options and recommends you to please check out some Credit spread strategies if you liked reading this information.
Spreading options tactic: Bull put spreads
Option trading involves trading of options instead of the stocks in an underlying exchange market. There are so many strategic ways to earn money in options trading; one way is through the bull put spread. This strategy is an independent trade employing a mixture of two different puts; however, this one is in a specific direction. In this spread, you have to buy a put contract for any strike price. Then you have to sell a put contract with a price higher than the original purchased. The profit comes from the difference between the sold option and the purchased put. The goal is for both put options to expire worthless.
To make a bull put spread, a trader would first have to sell a put contract. Then the trader would have to buy a single put contract for protection. As the trades progress, the trader is watching for the price to move upward.
Just like any strategies, there are risks as well as rewards to consider before doing this strategy. The risk of using a bull put spread strategy is low. The risk is limited and restricted only to the difference of the strike prices between the long and short puts, less the initial credit made when entering the trade. Mathematically speaking, a trader can calculate your bull put spread risk by the following formula:
Maximum Risk = (difference in the strike price between long and short put) minus (the Initial credit).
On the other hand, bull put spread reward is limited only to the premium credit made when you enter the trade.
Jeff Ziegler, author of this article is also interested in Credit spread options and recommends you to please check out some Credit spread strategies if you liked reading this information.
To make a bull put spread, a trader would first have to sell a put contract. Then the trader would have to buy a single put contract for protection. As the trades progress, the trader is watching for the price to move upward.
Just like any strategies, there are risks as well as rewards to consider before doing this strategy. The risk of using a bull put spread strategy is low. The risk is limited and restricted only to the difference of the strike prices between the long and short puts, less the initial credit made when entering the trade. Mathematically speaking, a trader can calculate your bull put spread risk by the following formula:
Maximum Risk = (difference in the strike price between long and short put) minus (the Initial credit).
On the other hand, bull put spread reward is limited only to the premium credit made when you enter the trade.
Jeff Ziegler, author of this article is also interested in Credit spread options and recommends you to please check out some Credit spread strategies if you liked reading this information.
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