Since the time I have started studying options I have become more and more impressed at them as investment tools of all seasons. Today I will discuss a strategy that I hope to put forward in layman’s words so that everyone understands it and can successfully implement it as far as possible.
The strategy is named Vertical Option Spread. Let us see who would like to use this strategy – I will be used by anyone who has had a loosing streak – anyone who takes whatever position and the market seems to be poised against him/her. Next is when can we use this strategy? Well this can be used when we are trending up, trending down or not trending. I am sure that you would have got it right. well it is true that you can use this strategy in – well almost all situations. The point still remains that you have to make sane decisions based on – let us say technicals. How much effort do I have to put in to make it work? Well if you are a habitual trader then you will be surprised how little time you have to put in. You have to study entry points then put in money and then wait for the eggs to hatch and that is about all. Then what is the catch? Well the catch is that firstly the gains are – depending upon strategy just about 8% to 15% and they are capped. Means that you will not make more than this in the best case scenario. Any other catch? well your losses are also capped at some points above the gains – but the good thing is that chances of your loosing are – let us say 20% or 25% of the times. Each strategy to give you money would take one expiry. So let us say we used this strategy and worked on the probabilities – then we have a good chance to get somewhere near 50-60% returns annually. Now if you are convinced that you need to know it then please continue reading ahead…
What I will do is that I will now explain the strategy first and then see the other aspects.
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