Options are an excellent vehicle for taking a directional view on a particular stock or the market as a whole. Having said that, I do not believe in buying puts or calls outright as time decay is the option owner’s worst enemy. So, we will discuss a simple and straightforward options strategy, the vertical spread. […]
Today, I want to talk about one of my very favorite low risk, high reward directional option strategies, the Butterfly. The strategy is long strike A one time, short strike B twice and long strike C once. The strategy is all puts or all calls. You can look at it as a combination of two vertical […]
With an increase of more than 30 percent in the S&P 500 during 2013, no one can blame the market for being stuck in the trading range this year. After five years of steady increases, a correction may be approaching soon. The signals are mixed so far: Although the financial crisis is behind us and the […]
Sometimes, the prospects for a stock are not very good. You might want to open a short position on a stock when the price is too high relative to earnings, when economic prospects deteriorate, or simply when you believe a stock will suffer some selling pressure. But the availability of short selling may be limited […]
Let’s talk today about another way to hedge your stock portfolio against a major move down, albeit indirectly. We can do this by using options on the CBOE Volatility Index (VIX) in the form of a vertical call spread. The VIX is an index which provides a measurement of implied volatility in the S&P 500 […]
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