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TastyBites Vertical_Spreads
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- 2. Trading Ver+cals In smaller sized accounts we o6en recommend avoiding higher risk trades such as naked selling of puts and calls. Also, we encourage keeping the variety of strategies to a minimum.
- 3. Trading Ver+cals Today we are going look at a defined risk strategy that is an effec+ve way to make a direc+onal play on the market. Because the risk is defined it is especially beneficial in smaller-‐sized accounts.
- 4. Trading Ver+cals Ver+cal spreads consist of the purchase of one op+on and the sale of another. Both op+ons are the same type (both calls or puts), and expire at the same +me. They only differ in strike price.
- 5. Trading Ver+cals Regardless of whether a ver+cal spread contains calls or puts, whenever a trader buys a lower exercise price and sells the higher price, the posi+on is bullish. The posi+on becomes bearish if the opposite is done.
- 6. Trading Ver+cals These are great strategies for smaller accounts because even with a large market move the delta of the posi+on will not invert. A bullish play remains bullish and a bearish play remains bearish.
- 7. Trading Ver+cals When we trade ver+cals we are generally sellers of premium. We look to take in a credit that reflects at least one third the width of the spread.
- 8. Trading Ver+cals So, for example, if we were looking to put on a bullish $1 wide put spread we would look to collect, at a minimum, $0.33 on that trade.
- 9. Trading Ver+cals Ver+cal spreads are just one of many op+on strategies available. With the defined risk characteris+c they are an essen+al basic strategy especially useful in small accounts.
- 10. Trading Ver+cals DISCLAIMER: The purpose of this material is to demonstrate market trading techniques and strategies designed to give you the skills and confidence to manage your own investments. The risk of loss in trading securi+es, op+ons, futures and forex can be substan+al. You must consider all relevant risk factors, including your own personal financial situa+on, before trading. Op+ons involve risk and are not suitable for all investors. You are assuming the en+re risk of any and all trades placed in the stock market. Due to the +me-‐ cri+cal nature of trading, the varying fees charged by brokerages, and the ac+vity of other market par+cipants, tastytrade cannot guarantee that similar trades you place will mirror the exact performance of the tastytrade porUolio. tastytrade is not a licensed financial advisor, registered investment advisor, registered broker-‐dealer or FINRA|SIPC|NFA-‐member firm. tastytrade does not provide investment or financial advice or make investment recommenda+ons. tastytrade is not in the business of transac+ng trades, nor does tastytrade agree to direct your commodity accounts or give trading advice tailored to your par+cular situa+on. Nothing contained in tastytrade’s porUolio demonstra+on cons+tutes a solicita+on, recommenda+on, promo+on, or endorsement of any par+cular security, other investment product, transac+on or investment. BY USING THE TASTYTRADE WEB SITE AND ACCESSING THE TASTYTRADE MATERIALS, YOU AGREE, AT ALL TIMES, TO INDEMNIFY, DEFEND, AND HOLD TASTYTRADE (INCLUDING ANY OF ITS AFFILIATES, OR ITS RESPECTIVE SUCCESSORS AND ASSIGNS, OR ANY OF ITS RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, REPRESENTATIVES, LICENSORS, OPERATIONAL SERVICE PROVIDERS, ADVERTISERS, OR SUPPLIERS) HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, ACTIONS, DEMANDS, SUITS, LOSSES AND COSTS (INCLUDING ATTORNEYS’ FEES) RESULTING FROM TRADES YOU PLACE IN THE MARKET. TASTYTRADE SHALL NOT BE LIABLE FOR ANY LOSS OR DAMAGE, OF ANY KIND, DIRECT OR INDIRECT, IN CONNECTION WITH OR ARISING FROM USE OF EDUCATIONAL SERVICES PROVIDED AS PART OF THIS PORTFOLIO DEMONSTRATION.