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25 Cards in this Set
- Front
- Back
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All pricing models are therefore subject to pricing errors as volatility is stochastic in nature.
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All pricing models are therefore subject to pricing errors as volatility is stochastic in nature.
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There are various ways to find credit spread strategies, Name One !
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A common way is to scan charts to find stocks approaching resistance or support
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Upside Breakaway Gaps:
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When the market corrects and comes down in price, these gaps can act as support areas
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What is a Credit Spread?
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Simultaneous sale + purchase of options with the same expiration month, but different strikes.
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Downside Breakaway Gaps:
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downside gaps can act as resistance areas when prices move up after a downward move
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Rule 2: of options
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If you do not buy underpriced options or sell overpriced options, you are going to lose eventually
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What is options trading about?
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You are spot on when you say that options trading is about estimating future volatility
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Trading for winning needs A: B: C:
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Under/overvalued Options
Sound Game-plan Discipline to follow gameplan. |
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Common Gaps:
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Prices return to fill common gaps, usually within a few days
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Maybe a bull put / Bear call spread on same stock.
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Advisable ifthe stock is going to stay in a range
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Measuring gaps -runaway gaps occur after a trend is established. Significant because they generally mark the midpoint of a move.
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Measuring gaps -runaway gaps occur after a trend is established. Significant because they generally mark the midpoint of a move.
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Credit spreads should be entered using options that expire in 45 days or less.
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Time Benefit,last 45 days of option sees largest time decay
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breakaway gap often occurs at the end of a sideways consolidation pattern
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It signals the beginning of a significant price move
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For a stock hitting strong support, we would want to check on entering a WHAT TRADE?
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Pull Put Spread.
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Why are credit spreads advantageous?
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They profit 2/3 of the time.
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Rule 3: Options
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You must also create a good game plan
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Measuring gaps can also act as support and resistance areas when price corrections occur in a major trend.
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Measuring gaps can also act as support and resistance areas when price corrections occur in a major trend.
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If a stock has strong resistance to overcome, WHAT TRADE might be a profitable choice
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Bear Call Spread
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Exhaustion gap occurs during the final stages of a move.
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Exhaustion gap occurs during the final stages of a move.
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Rule 1: of Options
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ALWAYS buy underpriced and sell overpriced options
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When can options be assigned?
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Assignment can occur at any time if your options are in-the-money.
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Rule C:
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Consistency: Try to be consistent
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Rule x: Options
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Also, be sure to diversify among different sectors over time.
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The Last ingredient for SUCESS
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The last ingredient to success is ironclad discipline
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The advantage to a credit spread is that we have a 67% chance of success.
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What is the advantage of a Credit Spread.
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