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How to Do RISKLESS Spread Trades
Spread Trades can capture
a lot of premium…
The BAD news: they can
also cost your shirt.
Example:
the
“BEAR
CALL
SPREAD”
The Bear Call Spread is
called a “credit” spread…
…because you get paid to do it.
SELL TO OPEN $77.50: $2.10
BUY TO OPEN $80.00: -$1.10
TOTAL CREDIT: +$1.00
If your stock
stays sideways
goes down, or
even a little up…
…you keep the
$1.00 (per share)
captured
from the spread.
Safe zone: you keep the $100 credit
Maximum loss: $150
If your stock goes
UP, you get
CLOBBERED!
BUT..!
a spread can
also bite
you back!
DANGER, WILL
ROBINSON! 
The
MARTINGALE
Strikes
AGAIN!
But
what
if
YOU
had a
secret
weapon?
An Ace in Your Sleeve?
..but NEVER
worry about it
BACKFIRING?
What if there was
a way to grab
the premium
of the spread…
Introducing a
REVOLUTIONARY
idea…“NESTED”
Spread Trades!
…a spread trade
nested within
another trade…
A strategy that
generates premium
in the spread trade…
…but NOT risk.
Wanna see how?
Let’s look at the
“Context” Trade
of our nested
spread,
A Married Put 
Your stock is protected
by a “put” option…
GILD stock 100 shares $75.70
November $77.50 put +$ 3.80
TOTAL INVESTMENT $79.5...
Now there’s no limit
to how high your
“MARRIED PUT”
investment may go,
…but there is a
hard stop,
in case the
play starts losing.
GILD stock 100 shares $75.70
November $77.50 put +$ 3.80
TOTAL INVESTMENT $79.50
That’s $7,950 invested with
unlimited ups...
Now let’s look at that
Bear Call Spread
again:
SELL TO OPEN $77.50: $2.10
BUY TO OPEN $80.00: -$1.10
TOTAL CREDIT: +$1.00
It gives you $100 at
the beginning, yes…
but has $250 risk!
That means you
can lose the $100,
PLUS an additional
$150/contract…
PAY ATTENTION
NOW…
You might THINK
that the $200
(married put risk)
+
$150 (bear call risk)
=
$350 total capital risk...
But in fact,
The total
capital risk
is only
…$100!
Check the
next slide
for the
COMBINED
position…
Combined
Risk/Reward
depiction
courtesy of
PowerOptions
(…FREE two
week trial! )
The $100 income received for doing a Bear
Call Spread… takes the risk of the Married
Put down… from original $200 to just ...
Meanwhile,
the Bear
Call Spread
has no
capital risk of
its own.
Risk in the
spread
would come
if we did not
own the
stock…...
$200 + $150 = $100 total risk? HUH?
(Yup.You actually end up with less
total risk by doing both plays!)
TA-DAAAAA! A RISKLESS Bear Call Spread!
That’s not all.
Let’s look closer:
IF your stock goes up,
…well, we kinda LIKE that
when it’s our stock. There’s
unlimited upside potential!
The net position has $100
risk, but unlimited potential.
But that’s not all. It MAY
possible to eliminate ALL risk.
Did You say
ELIMINATE RISK?
Let’s see how
THAT’S done…
The Put option protecting this
stock expires in November…
But the Bear Call Spread
finishes in September.
If your stock
stays sideways
or goes down…
You get to keep that $100 at
September expiry..!
So what happens if we do
keep the $100 premium?
Why, we get to do it again of course!
If you collect another $100…
…you’ll cancel all the risk.
• Aug 31: Married Put begins with $200 risk
– Also Aug 31“Nested...
Whether the stock goes up, down,
OR sideways… we WIN!
No RED
Water!!
This is called
“Bulletproofing”
NAY-SAYER ALERT!!
This SlideShare was uploaded on Sept 16, 2016
two weeks in advance of the Sept 30, 2016
expiry of the Be...
FURTHER NAY-SAYER ALERT!!
The original blog post was entered on
August 31 and there are over eighty
comments at the time o...
Imagine never worrying
about a Bear Call Spread…
HA!
Your
“Bear Style”
is no match
for my
kung fu!
…ever coming back to “bite you”!!
You’ve learned to eliminate
risk in the Bear Call Spread.
The best part?
It’s not just the Bear Call Spread.
There are
SEVEN riskless spreads.
There’s more than ONE
way to peel an ...
This quick slideshow is
just the start of “RadioActive”
riskless spread trading…
To learn more about Riskless Spread
Trading (and Bulletproofing!)…
…check out these articles on the
RadioActive Trading Blog!
You can Click these Links!
• Can You REALLY Do a RISKLESS Sprea...
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How to do Riskless Spread Trades

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Published on

Options trading, and spread trades in particular are FRAUGHT with RISK.

Yes, spread trading can present quite a lot of opportunity for gain, but these strategies can cost your shirt... unless you use risk-averse techniques like what's in today's SlideShare.

This short class on slides will illustrate how you can STOP losing at credit spreads, and instead grow your nest egg steadily. The methods inside are not sensational, nor do they promise crazy returns... instead they focus on limiting and even ELIMINATING risk by the combining of options strategies that are already known.. but in a very unique way.

Using the "defense first" mentality I learned as a 6th degree Kajukenbo black belt, options are used NOT as gambling chips or highly leveraged instruments, but rather employed in a unique way to limit risk or even eliminate it altogether.

IN 2007 'The Blueprint Update' was published, which resulted in a January 2008 invitation to lecture the New England Risk Averse Traders (NERATS) group in Boston at MIT.

There were number of MIT grads and Ph.D's in attendance, my heroes :-) The fields of study included economics, mathematics, and statistics.

The the riskless spread trades known as Income Method #5 and #6 were presented, along with four other adjustments for "Bulletproofing" a stock. Since then, "The Blueprint" has been sold in over 40 countries.

Join me in this introduction to the world of low- and no-risk trading.

If you are tired of seeing YOUR balance dwindle because of covered calls, calendars calls, vertical spreads and other risky ways of trading... the slow but steady march of low- risk and no-risk trading techniques can be your answer.

Enjoy the slides! Please share, but do not change the content. Visit the blog at "blog.radioactivetrading.com" for more information. Also consider the premium video teaching, "How to STOP Losing at Spread Trades FOREVER" as you shop ways to insure your investments.

Happy Trading!

Published in: Economy & Finance

How to do Riskless Spread Trades

  1. 1. How to Do RISKLESS Spread Trades
  2. 2. Spread Trades can capture a lot of premium…
  3. 3. The BAD news: they can also cost your shirt.
  4. 4. Example: the “BEAR CALL SPREAD”
  5. 5. The Bear Call Spread is called a “credit” spread…
  6. 6. …because you get paid to do it. SELL TO OPEN $77.50: $2.10 BUY TO OPEN $80.00: -$1.10 TOTAL CREDIT: +$1.00
  7. 7. If your stock stays sideways goes down, or even a little up…
  8. 8. …you keep the $1.00 (per share) captured from the spread. Safe zone: you keep the $100 credit
  9. 9. Maximum loss: $150 If your stock goes UP, you get CLOBBERED! BUT..!
  10. 10. a spread can also bite you back! DANGER, WILL ROBINSON! 
  11. 11. The MARTINGALE Strikes AGAIN!
  12. 12. But what if YOU had a secret weapon?
  13. 13. An Ace in Your Sleeve?
  14. 14. ..but NEVER worry about it BACKFIRING? What if there was a way to grab the premium of the spread…
  15. 15. Introducing a REVOLUTIONARY idea…“NESTED” Spread Trades!
  16. 16. …a spread trade nested within another trade…
  17. 17. A strategy that generates premium in the spread trade… …but NOT risk.
  18. 18. Wanna see how?
  19. 19. Let’s look at the “Context” Trade of our nested spread, A Married Put 
  20. 20. Your stock is protected by a “put” option… GILD stock 100 shares $75.70 November $77.50 put +$ 3.80 TOTAL INVESTMENT $79.50 Protected by Put: -$77.50 Total Amount AT RISK $ 2.00 (per share; risk of 100 shares is $200)
  21. 21. Now there’s no limit to how high your “MARRIED PUT” investment may go,
  22. 22. …but there is a hard stop, in case the play starts losing.
  23. 23. GILD stock 100 shares $75.70 November $77.50 put +$ 3.80 TOTAL INVESTMENT $79.50 That’s $7,950 invested with unlimited upside potential, but a limited amount of risk In this case the total amount AT RISK is $200, or 2.5%.
  24. 24. Now let’s look at that Bear Call Spread again: SELL TO OPEN $77.50: $2.10 BUY TO OPEN $80.00: -$1.10 TOTAL CREDIT: +$1.00
  25. 25. It gives you $100 at the beginning, yes… but has $250 risk!
  26. 26. That means you can lose the $100, PLUS an additional $150/contract…
  27. 27. PAY ATTENTION NOW…
  28. 28. You might THINK that the $200 (married put risk) + $150 (bear call risk) = $350 total capital risk...
  29. 29. But in fact, The total capital risk is only …$100! Check the next slide for the COMBINED position…
  30. 30. Combined Risk/Reward depiction courtesy of PowerOptions (…FREE two week trial! )
  31. 31. The $100 income received for doing a Bear Call Spread… takes the risk of the Married Put down… from original $200 to just $100. Just look at the red water getting shallower…
  32. 32. Meanwhile, the Bear Call Spread has no capital risk of its own. Risk in the spread would come if we did not own the stock… but we do. $77.5/$80 bear call spread has no inherent capital risk
  33. 33. $200 + $150 = $100 total risk? HUH? (Yup.You actually end up with less total risk by doing both plays!)
  34. 34. TA-DAAAAA! A RISKLESS Bear Call Spread!
  35. 35. That’s not all. Let’s look closer:
  36. 36. IF your stock goes up,
  37. 37. …well, we kinda LIKE that when it’s our stock. There’s unlimited upside potential!
  38. 38. The net position has $100 risk, but unlimited potential. But that’s not all. It MAY possible to eliminate ALL risk.
  39. 39. Did You say ELIMINATE RISK? Let’s see how THAT’S done…
  40. 40. The Put option protecting this stock expires in November…
  41. 41. But the Bear Call Spread finishes in September.
  42. 42. If your stock stays sideways or goes down…
  43. 43. You get to keep that $100 at September expiry..!
  44. 44. So what happens if we do keep the $100 premium?
  45. 45. Why, we get to do it again of course!
  46. 46. If you collect another $100… …you’ll cancel all the risk. • Aug 31: Married Put begins with $200 risk – Also Aug 31“Nested Spread” captures $100... $100 risk left • Sep 30: Bear Call Spread Expires – “bank” the first Bear Call Spread, do another Bear Call Spread – Capture a second $100! – $200 total captured offsets the $200 AT RISK… – NO risk left!
  47. 47. Whether the stock goes up, down, OR sideways… we WIN! No RED Water!!
  48. 48. This is called “Bulletproofing”
  49. 49. NAY-SAYER ALERT!! This SlideShare was uploaded on Sept 16, 2016 two weeks in advance of the Sept 30, 2016 expiry of the Bear Call Spread. Whether the goes down, up, or sideways, the Bear Call Spread itself poses no capital risk. Watch for the followup SlideShare to see how this real example is managed!
  50. 50. FURTHER NAY-SAYER ALERT!! The original blog post was entered on August 31 and there are over eighty comments at the time of this writing. The riskless Bear Call Spread featured in the blog post is commonplace. We have six others. Watch for the followup SlideShare to see how this real example is managed!
  51. 51. Imagine never worrying about a Bear Call Spread… HA! Your “Bear Style” is no match for my kung fu!
  52. 52. …ever coming back to “bite you”!! You’ve learned to eliminate risk in the Bear Call Spread.
  53. 53. The best part? It’s not just the Bear Call Spread. There are SEVEN riskless spreads. There’s more than ONE way to peel an apple. Get this two hour video on SEVEN different riskless spread trades “Stop Losing at Spread Trades Forever”!
  54. 54. This quick slideshow is just the start of “RadioActive” riskless spread trading…
  55. 55. To learn more about Riskless Spread Trading (and Bulletproofing!)…
  56. 56. …check out these articles on the RadioActive Trading Blog! You can Click these Links! • Can You REALLY Do a RISKLESS Spread Trade? • WHAT on Earth is a Nested Spread Trade? • The Strange Secret of Riskless Spread Trading • The RISKLESS Spread Trade that Pays You TWICE OR! Get this two hour video on SEVEN different riskless spread trades “Stop Losing at Spread Trades Forever”!

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