Options Strategies

An alligator spread refers to the heavy commissions paid by the investor to their broker in initiating a combination of call and put options. The commissions paid become so high that they strip the profit potential out of the trade.

The bear put spread is an options strategy which uses two put options to bet on downside price movement with a limited risk and limited reward outcome.

Buying a calendar spread involves buying a longer term LEAP call and selling a shorter dated call, resulting in a net debit transaction. The crux of this strategy revolves around the idea that the theta on the shorter term option will increase rapidly as expiration approaches which causes the shorter term option to lose its time value much faster than a longer dated one.

The bullish call spread can be created by buying lower strike calls and selling, or shorting, the same number of higher strike calls with the same expiration. It will cap your profit potential but limit your downside at the same time if the stock does not go up as you expected.

The bull put spread utilizes one long and one short put to profit from a rising market.

The butterfly spread is put together to create a low risk, low reward options strategy and is designed to take advantage of a market or stock that is range bound. The butterfly can be created using call or put options.

A call ratio backspread is a good strategy if you have a strong conviction that the security you are buying options on will have a strong upside move.

A Call Ratio Spread is an options strategy for traders who believe that the stock go sideways to down until expiration of the option. The strategy consists of buying 1 in the money call and selling 2 out of the money calls on the same underlying security and expiration date

A Collar options strategy employs the use of LEAP calls and puts to set up a very low risk/riskless trade.

The condor spread takes advantage of a range bound stock which will make very small movements until expiration. The condor spread utilized four options; all calls or all puts.

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