Hi Prevail,
How does the cost of the backspreads deducted from sold Option premium, produce an enhanced return assuming backspreads was done at a debit, otherwise the spread between the sold option and the additional bought hedging option would be large producing an uncovered area. Most Options sellers that I know produce income from the premium, not trading direction! Speaking for myself I've always had trouble with the concept of selling something that I believe will increase in value whilst trying to avoid Black Swans! I therefore prefer Spreads whilst trading direction.
I'd be interested in other peoples experiences when trading Backspreads.
Best Regards
Johno
How does the cost of the backspreads deducted from sold Option premium, produce an enhanced return assuming backspreads was done at a debit, otherwise the spread between the sold option and the additional bought hedging option would be large producing an uncovered area. Most Options sellers that I know produce income from the premium, not trading direction! Speaking for myself I've always had trouble with the concept of selling something that I believe will increase in value whilst trying to avoid Black Swans! I therefore prefer Spreads whilst trading direction.
I'd be interested in other peoples experiences when trading Backspreads.
Best Regards
Johno