Collar Buying

The condor is basically a combination of a bull call spread and a bear call spread. Essentially, options with consecutive strike prices, buying options with a lower exercise price, and options with higher exercise price. The condor is generally created using the same numbers of short and long calls (or puts). You will nee to…

A capped option will be automatically exercised prior to expiration if the options market on which the option is trading determines that the value of the underlying interest at a specified time on a trading day “hits the cap price” for the option. Capped options may also be exercised, like European-style options, during a specified…

DTE means Days To Expiration. This is basically the number of days left until your Option contracts expire.  As an options trader you will want to play very close attention to the DTE when you are selecting which contract to buy or sell. The number of days to expiration can impact the profitability of a…

This is a measure of a stock’s volatility relative to the S&P 500 Index. High Beta stocks have high volatility. Stocks that have a beta reading of 1.00 or greater tend to move faster or are more volatile than the S&P index. And stocks that have a beta less than 1.00 tend to move slower…

A Box Spread is simply a combination of two vertical spreads. These spreads are used by professional Options traders who are trying to take advantage of a situation where the cost of the spreads (both verticals) is less than what the verticals would be worth when they expire. They consider this to be a type…

This method is normally used when Options are overpriced. The trader would simply buy stocks in the open market and sell the equivalent position in the options market. This is done because the trader sees that the Options price is too high and anticipates that it will eventually decrease. So he/she decides to cash in…