Many traders who are new to trading options prefer to keep it simple, usually sticking to straight buying of puts or calls to match their market outlook. But moving from outright options buying and selling to spread trading is not as difficult as it may seem. Here we look at a trade that can be used for trading a bullish outlook with a limited risk options credit spreadwhich can be substituted for buying options.

The position contains a significant statistical edge, as well as an overall lower risk profile. Trading the QQQQ To illustrate the above strategy, we will use the QQQQ formerly the QQQ as an example. The "Qs", as they are commonly known, represent the ticker symbol for the Nasdaq Trust, an ETF exchange-traded fund that tracks the Nasdaq index.

Traders can buy and sell the Qs if they want to trade the underlying Nasdaq Index, much like futures traders trade futures contracts on the same index. Option traders, meanwhile, can trade the options on the QQQQ, and these options have exploded in volume since they were introduced. For further reading on ETFs, see Introduction To Exchange-Traded Funds.

Let's say you believe that you have a medium-term bullish outlook on the market and would like to speculate on this view using options.

One approach might be to simply buy two long-dated at-the-money options on the QQQQ, which would have a position delta of about or 1. Suppose you decide you would like to buy two January at-the-money options to go long on the QQQQ.

This would give you unlimited upside profit potential with limited risk on the downside. The QQQQ at the time of writing was trading at Of course, one of the downsides to buying options is risk from time-value decay.

Meanwhile, if the move never occurs, and the QQQQ heads lower, the loss of the entire premium paid for the options is possible. To learn more about time value, see The Importance Of Time Value.

Finding a Better Trading Solution In order to speculate on a bullish move higher, it would be nice to minimize the theta risk mentioned above. Fortunately, there is a way to do this without sacrificing your probability of profit from a statistical point of view.

There is only one small, insignificant cost, which comes in the form of a few extra dollars in commissions because you are going to use a spread, which has an extra leg. Assuming again that the QQQQ is at Here you would pick a deep in-the-money put to sell and an at-the-money put to buy.

You are selling two spreads to make the position roughly equivalent to the long calls position shown above. As presented in Figure 3, there is only 1. This is the potential maximum loss if the market heads straight down, or remains below the 39 by expiration. Now as you can see in Figures 1 and 2, both positions are nearly equivalent in terms of position deltas with the long calls gaining an edge if the QQQQ moves significantly higherbut the theta risk is significantly different.

For further reading, see Using The Qqqq put options To Understand Options.

Finally, while not shown here, the probability of profit and expected profit are substantially different effects of oil prices on saudi stock market a purely statistical point current share market price of wipro view.

While, statistically, these trades don't look good overall, if your market outlook is correct and a good move liczby fibonacciego na rynku forex occurs, you would be better off with the alternative approach based on this probability perspective.

With a really big move higher, the long calls would acquire more potential profit at expiration. The Bottom Line Given the evidence, it seems that selling an in-the-money put spread on the QQQQ, which could be applied to many individual stocks, has certain key advantages over buying at-the-money calls.

Perhaps most importantly, the cost of cara trading forex dengan fibonacci wrong is also higher, for the long calls.

So if you are new to trading options, keeping it simple may mean short changing yourself. Consider moving to options spread trades, such as an in-the-money put spread - understanding them may be easier than you expected. If you're looking for an introduction to the world of options, see our Options Basics Tutorial. Dictionary Term Of The Day. A measure of what it costs an investment company to operate a mutual fund.

PowerShares QQQ Trust, Series 1 (QQQ) Option Chain - Stock Puts & Calls - xelenew.web.fc2.com

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Trading The QQQQ With In-The-Money Put Spreads By John Summa Share.

Figure 1 - January at-the-money QQQQ 39 long calls. January QQQQ Puts Option Position Option Prices Time Value Net Credit Jan 46 put Sell 2 6. We'll show you how to use the average monthly trading range to score better returns. There are ways to control risks, reduce losses and increase the likelihood of success in your portfolio.

QQQ Options Chain - PowerShares QQQ Trust Series 1 Options Chain - MarketWatch

Find out how spreads can help. This trading strategy is an excellent limited-risk strategy that can be used with equity as well as commodity and futures options.

Learn why option spreads offer trading opportunities with limited risk and greater versatility. Writing bull put credit spreads are not only limited in risk, but can profit from a wider range of market directions. A bull put spread is a variation of the popular put writing strategy, in which an options investor writes a put on a stock to collect premium income and perhaps buy the It seems counterintuitive that you would be able to profit from an increase in the price of an underlying asset by using Learn about how debit option spreads work, including their maximum profit and loss, and understand how time decay impacts Learn how using an out-of-the-money time put spread can be used to hedge downside risk by reducing the amount of premium Learn about debit and credit option spread strategies, how these strategies are used, and the differences between debit spreads Learn how a short call is used in a bear call spread option strategy, and see how a bear call spread benefits from the time An expense ratio is determined through an annual A hybrid of debt and equity financing that is typically used to finance the expansion of existing companies.

A period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all A legal agreement created by the courts between two parties who did not have a previous obligation to each other. A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. A statistical technique used to measure and quantify the level of financial risk within a firm or investment portfolio over No thanks, I prefer not making money.

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