No I don't. If you were not so busy trying to be a smart ass, you would understand that I am talking about spreads that keep being more profitable (or at least neutral when your profit gets capped) as the stock keeps going in the same direction. What happens when your underlying goes from $115 to $125? YOU LOSE MONEY WHILE THE STOCK KEEPS GOING IN THE SAME DIRECTION! How is that directional?
Directional spreads
- Thread starter candeo
- Start date
No I don't. If you were not so busy trying to be a smart ass, you would understand that I am talking about spreads that keep being more profitable (or at least neutral when your profit gets capped) as the stock keeps going in the same direction. What happens when your underlying goes from $115 to $125? YOU LOSE MONEY WHILE THE STOCK KEEPS GOING IN THE SAME DIRECTION! How is that directional?
its directionality along a curve. just remember, even long outright nonspreaded options are directional along a curve too - the curve just has a different shape.
I am pompous? Just read your messages. About being ignorant, I never pretended to be an expert on spreads. I have been trading for a living for many years now, making a good living at it. I think I know enough to be able to support my family. I am still learning and this is why I am asking questions. Some people, such as asap, are helpful with great answers. Some find it "pleasurable" to just insult and attack, even when they obviously don't understand the question.
Stock is at $50 with high IV and 45 day $50 Call is trading at $5.00 while $50/$60 bull call spread is trading at $2.00.
Scenerio 1 - Buy Long $50 Call and by expiration, stock eventually moves to $56 by expiration and IV drops and you sell call for $6.00 for profit of $1.00
Scenario 2 - Buy Bull Call Spread for $2.00 and stock eventually moves to $56 by expiration and IV drops and you sell spread for $6.00 ( really only selling long call as short expires worthless) for profit of $4.00.
Assuming you did 10 spreads versus 10 long calls, spreads is much better risk/return and takes advantage of high IV rather than suffering from it.
Assuming you only wanted to spend $1,000 on the position you would do 2 long calls or 4 spreads and spread still comes out ahead.
I showed you an example. Have an open mind
Assume stock goes to $60 at expiration, spread still is better in this situation.
I truly don't know. I trade, I don't guess. $115 exactly at expiration or $125 exactly at expiration? Who knows...anything can happen. Probabilities will say $115 but I don't trade much probabilities.
Anyway, what does it have to do with anything? if you had even taken the time to read the previous messages, you would understand that my goal is to capture a large move. So, yes, my goal is for the stock to go to $125, and even higher. Why is that so difficult for you to understand? A butterfly won't help me at all. It's very simple but maybe not for you.
It is really sad that this board, which has so many knowledgeable, helpful traders is polluted by people who are just trying to "show off" and insult everyone. What's funny is that most of the time these individuals are the struggling traders who are not capable of turning a profit. Reminds me of the old yahoo boards.