Option Workshop blog #call

Tuesday, 18 April 2017

Bear Call Spread

Strategy name and alternative names

Bear Call Spread. An alternative name is Credit Call Spread.

Main characteristics

Bearish position. It is a vertical spread involving an equal number of long and short calls on the same underlying asset and with the same expiration date. It is a credit spread, which means you receive money to put on the position. The strategy profits as long as the price of the underlying security remains below the breakeven point.

Options used in the combination

Sell to open one at-the-money (ATM) call and simultaneously buy to open one out-of-the money (OTM) call. The strike price of the short call is below that of the long call. The advantage of this spread is that it benefits from time decay and provides an immediate inflow of cash. The maximum gain and loss on the spread are very limited and well defined.

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Friday, 03 February 2017

Straddle

Strategy name and alternative names

Straddle. An alternative name is Long Straddle.

Main characteristics

Neutral position. It is a combination involving an equal number of long puts and long calls at the same strike price and the same expiration date. It is a debit combination, which means you must pay to put on the position. The strategy profits when the price of the underlying security moves up or down beyond the breakeven points.

Options used in the combination

Buy to open one at-the-money (ATM) call and simultaneously buy to open one ATM put. Both options derive from the same underlying stock and have the same strike price and expiration date. The advantage of this combination is that it benefits from volatility, independent of the direction of stock price movement. Both the put and the call have (potentially) unlimited upsides but limited loss exposure.

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Wednesday, 18 January 2017

Vertical Bull Debit Call Spread

Strategy name and alternative names

Vertical bull debit call spread. An alternative shorter name is bull call spread.

Main characteristics

Moderately bullish. It is a vertical spread, which means it involves two or more options at different strike prices with the same expiration date. It is a debit spread, which means you must pay to put on the position. The strategy profits when the underlying security rises moderately.

Options used in the spread

Buy to open one at-the-money (ATM) call and simultaneously sell to open one out-of-the money (OTM) call. Both calls derive from the same underlying stock. The advantage of this spread is that the credit from the sale of the OTM call partially offsets the debit paid for the ATM call. Basically, the spread allows you to buy the ATM call at a discount in exchange for a cap on the maximum profit you can extract from the spread.

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Wednesday, 01 June 2016

Modelling a naked call position

Small intro about how-tos

We often hear the rebuke that our documentation is much too dry and much too technical. With this blog we’re going to breath in some personality into our public material. We’ll do this by examining some concrete use examples and describing how to solve them using our software. All posts of this kind will be registered in the how-to category, so it will be easy to filter them.

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