I do not understand. If you intend to benefit from the fall of gold, when you buy call if the market goes down you lose money. If you sell a put and the market falls you also lose money.
Swingtrading with options
- Thread starter trader1974
- Start date
I do not understand. If you intend to benefit from the fall of gold, when you buy call if the market goes down you lose money. If you sell a put and the market falls you also lose money.
Thanks, yes a vertical debit spread is another choice albeit with limited profit potential.
I'm looking at 90 DTE in order to give a long call or put trade time to breath. If you have a time span that if limited then you are battling theta right away.
You're "battling" theta regardless if you buy premo.. If you are confident in your directional bias (which is dangerous) but if so then buy some call verticals with a month to expire.. If price keeps going in your intended direction just re-deploy capital into another call vertical the next month and so on.
OK thanks, that is a good idea. What would happen to three original call vertical once the month is up? I take it that I would sell it before it expired assuming it's in profit?
CannonTrading_Ilan
Sponsor
The call provides protection to a certain degree and the selling of the put if market goes your way acts as partial profit taking.
A bit more and in depth here.
Short gold + call = synthetic long put at the call strike. Later put short at a lower strike = synthetic long put vertical.
Why a call vertical rather than a straight call?
CannonTrading_Ilan
Sponsor
take a way some of the time value built in to the options by selling above/ using the market money. You give up possible "extra profit" but I personally believe it is a better way, depending on how much time you are looking to buy, strike prices etc.
Ok thanks. If the underlying didn't get to your strike price then you can still profit using vertical spreads?
By the way, been following your site for a while, great educational content there!
CannonTrading_Ilan
Sponsor
Thank you!
The spread will make money if price goes your way as long as there is time left. It is just not as a sensitive both to moves in your favor or against you like outright options. ( smaller delta).
The spread can allow you to get closer to the money since you are financing part of the cost by selling a higher call price.
Here is a better, more articulate explanation:
The spread will make money if price goes your way as long as there is time left. It is just not as a sensitive both to moves in your favor or against you like outright options. ( smaller delta).
The spread can allow you to get closer to the money since you are financing part of the cost by selling a higher call price.
Here is a better, more articulate explanation: