In the world of investing, understanding various financial metrics is crucial for making informed decisions. One of the most commonly referenced metrics is the Price-to-Earnings (PE) Ratio. This simple yet powerful tool offers insights...
In order to protect a stock, investors and traders use the collar. The collar, also known as cylinder strategy or fence strategy, is like insurance for stocks. You can create a collar by using...
Conversion is basically a floor trader strategy. The principle behind this strategy is known as creating a synthetic short position and then offsetting it with long position of the same stock. Floor traders, in...
Reversal is similar with the arbitrage and conversion strategies. This involves purchasing one option and selling another to make money from the difference between the two. This strategy is often used by traders to...
The short strangle is a neutral strategy since profit is achieved from sideway movements of stocks. Short strangles are the same with the short straddles because you can both profit from a stagnant market....
The calendar spread is also known as the time spread or horizontal spread because this profits on time decay of options with different expiration dates. The horizontal spread is called as such because the...
The put ratio spread is considered a neutral strategy because you do not want movement in stocks in this strategy. The ratio spread is a good strategy if you are anticipating a relatively stable...
The long strangle takes advantage of market movement from either direction. The short strangle and long strangle are different in the way they respond to movement in the market. They are both neutral because...
The short straddle, like the long straddle, is considered a neutral strategy. The short and long straddles are different in the way they respond to movement in the market. They are both neutral because...
The long straddle takes advantage of stocks moving in either direction. The short and long straddles are different in the way they respond to movement in the market. They are both neutral because the...
This is a good strategy for when you have a neutral feeling about a stock because it is trading on narrow range over a period of time. This is similar with the butterfly in...
The long butterfly is a three legged strategy. It is best for neutral outlook or when you are anticipating a very little change in the price of the stock during the life of the...
If you have a strong feeling that a stock will drop soon, you can short sell your stock. However, this is a risky strategy since you can suffer from unlimited loss if the price...
The naked call is considered as one of the riskiest strategies since because the potential for loss is unlimited. Here the seller of the naked call is highly exposed to risk because he does...
The put back spread is a good strategy when you are anticipating a significant drop in a volatile stock. To create a put back spread, you will need to sell a put at higher...