Tuesday, December 18, 2012

Playing Weekly Options - Option Spread Trade To Magically Create Options Profits

By Ted Nino

The use of Weekly Options Calendar Spread is a very common system widely used nowadays by option traders. In addition to it being an easy-to-understand strategy for option trading, a lot of newbies in option trading also find this strategy very easy to do requiring them lesser time to manage and work on it. Therefore, sticking to the computer screens and checking out the fluctuations in the market is not anymore necessary for any credit spread sellers just so they can constantly generate their income.

In addition, the vertical spread should be given importance because it is an essential component of a number of other option spread strategies like the iron condor, the butterfly spread, the double diagonal, and many others. This is important specially for those who are new to weekly options trading. These new option traders usually resort to this kind of approach once they have decided for the options and once they have purchased straight calls and puts, covered calls, and debit spreads.

Traders like to sell these weekly options spreads because when invested well the trades have a good probability of success and can allow the investor to still profit and 'win' without having to be perfectly right with price direction and movement. When the credit spreads are sold rightly, nothing could be more helpful than getting a good monthly return while the individual who actually placed the trade could not be right with their prediction of where the stock market is heading in the next couple of days.

For example let's say our trader is bearish on the stock XYZ. XYZ is trading at a recent high and our trader believes that the stock will not move any higher over the next 30 days. So, he sells a bear call spread - a call option vertical spread that benefits in a neutral to bearish circumstances.

If the prediction of our Weekly Options trader is correct, the spread trade wins. Now here's a great news! Even if our trader's prediction is wrong, this trade can still win given that the stock doesn't move up way too much. In short, the trade can lose if the stock market moves up too fast and too high. The only way to win is our trader's proper management and right attitude in dealing with the situation.

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