Trading Option Backspreads

Business & Finance, Finance & Investing, Investments & Securities
Cover of the book Trading Option Backspreads by Adam Warner, Pearson Education
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Author: Adam Warner ISBN: 9780132836333
Publisher: Pearson Education Publication: September 13, 2011
Imprint: FT Press Language: English
Author: Adam Warner
ISBN: 9780132836333
Publisher: Pearson Education
Publication: September 13, 2011
Imprint: FT Press
Language: English

This is the eBook version of the printed book.

A backspread is an option spread in which a trader carries a short position in one option series and a greater quantity of long position in another option series. The backspread gives you a two-pronged bet. Since you typically structure them to yield a credit, you win small if the entire trade goes worthless. You also have extra long puts on a put backspread, and extra long calls on a call backspread, so you potentially win big if the underlying stock moves sharply beyond your strike prices. That sounds fantastic, like getting paid to buy a lottery ticket. Alas, you face risks, too. You lose if the underlying stock hovers near the strike price you own or if implied volatility of the options declines while the stock moves into unfavorable territory. Even so, backspreads provide excellent risk/reward characteristics if you want to bet on a move in the underlying stock. In this Investing Short, Adam Warner shows you how.

View on Amazon View on AbeBooks View on Kobo View on B.Depository View on eBay View on Walmart

This is the eBook version of the printed book.

A backspread is an option spread in which a trader carries a short position in one option series and a greater quantity of long position in another option series. The backspread gives you a two-pronged bet. Since you typically structure them to yield a credit, you win small if the entire trade goes worthless. You also have extra long puts on a put backspread, and extra long calls on a call backspread, so you potentially win big if the underlying stock moves sharply beyond your strike prices. That sounds fantastic, like getting paid to buy a lottery ticket. Alas, you face risks, too. You lose if the underlying stock hovers near the strike price you own or if implied volatility of the options declines while the stock moves into unfavorable territory. Even so, backspreads provide excellent risk/reward characteristics if you want to bet on a move in the underlying stock. In this Investing Short, Adam Warner shows you how.

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