Stocks & Commodities V. 21:3 (68-70): Hidden Risks Of Debit Spread by Alex Mendoza

Stocks & Commodities V. 21:3 (68-70): Hidden Risks Of Debit Spread by Alex Mendoza
Item# \V21\C03\061DEBT.PDF
$2.95
Availability: In Stock

Product Description

Hidden Risks Of Debit Spread by Alex Mendoza

Understand all your risks when you trade. Strategies that seem harmless could end up costing you.

Debit spreads are a favorite strategy among experienced options traders who understand the need to hedge risk, however strong their directional convictions. For example, if the price of the underlying instrument rises, instead of profiting from a simple call, you can hedge the risk of the total cost of the option by selling another call at a higher strike price. This would lower the cost basis of your trade. The tradeoff for the lower risk is that profits are limited to the difference between the strikes minus the initial debit.

On the surface, common sense would lead you to believe that the risk in all debit spreads is limited to the debit of the trade. But the way assignment takes place in American-style, cash-settled options is such that any short option position, even within the confines of a spread, will give the holder of the trade unlimited risk even a position as seemingly harmless as a bull call spread.




FOR THOSE ORDERING ARTICLES SEPARATELY:
*Note: $2.95-$5.95 Articles are in PDF format only. No hard copy of the article(s) will be delivered. During checkout, click the "Download Now" button to immediately receive your article(s) purchase. STOCKS & COMMODITIES magazine is delivered via mail. After paying for your subscription at store.traders.com users can view the S&C Digital Edition in the subscriber's section on Traders.com.




Take Control of Your Trading.
Professional Traders' Starter Kit
All these items shown below only $299.99!
  • 5-year subscription to Technical Analysis of STOCKS & COMMODITIES, The Traders' magazine. (Shipping outside the US is extra. Washington state addresses require sales tax based on your locale.)
  • 5 year access to S&C Archive
  • 5 year access to S&C Digital Edition
  • 5-year subscription to Traders.com Advantage.
  • 5-year subscription to Working Money.
  • Free book selection.
  • Click Here to Order