Playbook: Spreads: the Long Call Calendar Spread
The long call calendar spread (or ‘long horizontal spread’ or ‘counter spread’ or ‘time spread’) is a neutral/slightly bullish strategy that is spread over time and combines a long call in the front month with a short call in the back month, for which you have to pay a net debit. For this strategy,…
Playbook: Spreads: the Dual Bear Spread (Delta Buster)
Dual Bear Spread (Delta Buster) The delta buster combines an inexpensive ATM long bear put spread , typically 10-point/$10 wide, with an expensive OTM short bear call spread that results in a negative -30Δ, give or take. Risk is limited, so profit as well, PoP is low to medium, The…
Playbook: Spreads: the Short Iron Condor
Short Iron Condor This strategy can be profitable for stocks that are rangebound (have no direction, go sideways). It is the combination of a bull put spread and a bear call spread. The higher strike put is lower than the lower strike call in order to create the condor shape….
Playbook: Spreads: the Bear Call
Bear Call The bear call (or ‘call credit spread’) is a vertical credit spread (you will receive a premium for it). It is a short call ‘protected’ on the upside by a long call. Call credit spreads/bear calls are a way of getting long shares with limited risk. The short…
Playbook: Spreads: the Bull Put
Bull Put The bull put (or ‘put credit spread’) is a vertical credit spread (you will receive a premium for it). It is a short put ‘protected’ on the downside by a long put. Put credit spreads/bull puts are a way of getting long shares with limited risk. The short…
Playbook: Spreads: the Bear Put
Bear Put The bear put is a vertical debit spread (you will have to pay for it). It is a long put ‘protected’ on the upside by a short put. The short put reduces also your cost. The disadvantage is that you cap potential on the downside, so you don’t…
Playbook: Spreads: the Bull Call
Bull Call The bull call is a vertical debit spread (you will have to pay for it). It is a long call ‘protected’ on the downside by a short call. The short call reduces also your cost. The disadvantage is that you cap potential on the upside, so you don’t…
Playbook: Basis: the Long Put
Long Put The long put is the opposite of the long call. A put is an option to sell. The seller has the obligation to take the other side (sell the put). The buyer of the put option has a right to take delivery (put). The position benefits from IV/IVR…
Playbook: Basis: the Short Put
Short (Naked) Put The short put (or ‘naked put’) is the opposite of the short call and looks like the long call since it is also bullish. It is a simple, short-term income strategy (generating income on a regular basis). Such strategies are typically short-term. Option premium is sold on…
Playbook: Asset-Based: the Covered Call
Covered Call This is one of the most used income strategies and is highly effective when done on a regular (monthly) basis. Covered call = own/buy (long) underlying + sell (short) OTM call. Owning the stock means that you’re ‘covered’. The short call gives you downward protection. A covered call…