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Options traders will know this trade is referred to as an iron condor, and it presents a way to appreciably decrease your aggregate margin requirements. Some instances warrant selling both a call spread and a put spread. You get to sell the Pounds at the better rate while everyone else must pay the other rate. For example, on March 7 we bought GBZCS (BBH Mar 2006 195 Call) at a price of $1.50. As a result, you decide to create a bull spread. On its surface, the bull spread options strategy appears to be a slow but sure way of making money. Since one strike is higher than the other, it is known as a vertical (or price) spread. Peter Flemming is a professional Forex Trader and is a staff writer for a forex trading website about learning forex trading and trading education. Buying an option gives you the right, but not the obligation to purchase the asset at a specific price (called the strike price). An investor can sell their option at any point within the time frame of the option. Think about all the times you have owned options with an expiration date bearing down. Many seek to make a fortune by hitting a grand slam through purchasing out of the money options. I generally write about ways that people can maximize their consumer dollars. And if you need assistance or needs to seek advice, you can use email, helpdesk, instant messaging or even skype to communicate with your broker or fellow investors. The large preponderance of retail options traders are strictly buyers. There are a variety of different trading strategies that options can be used for. It is possible to have both call and put options on the same commodity or stock; this is a "straddle" strategy. However, if the trader is wrong regarding the assumptions of the underlying security, then he or she will find the bull spread option strategy to be a slow but sure way of losing. Assume that for options expiring next month, a call option with a strike price of $100 costs $3 per share, or $300 per contract, while a call option with a strike price of $115 is selling at $1 per share, or $100 per contract. If you are still holding the options at that time they will expire and be worthless. "BBH" is the underlying asset, which in this case is a Biotech exchange traded fund. The maximum loss on the trade equals $2 per share, the net debit. And the keys to maximizing a profit in a bull spread is in the assumption that the underlying security involved will be subject only to a moderate price increase and over the shortest time possible. We have been getting a lot of questions lately about options trading because of our new options trading service, so I wanted to use this week's article to explain the basics of trading options. Some spreads have different strike prices while others have different expiration dates and a few varieties include both. If you break any of your rules, or don't do these 10 things, then you must confess. Sometimes, to throw salt on the wound, the stock moves your way a day or two after expiration.
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