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anyone do verticle spreads


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anyone do verticle spreads

  #11 (permalink)
 futs 
Clearwater FL US
 
Experience: Beginner
Platform: Etrade, Tradovate and TOS
Trading: SPX, /ES, /MES, Options
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Watch their videos and take their options course to learn the Greeks.

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  #12 (permalink)
 
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 SMCJB 
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bchip View Post
Today AAPL is @ 230
When I open a Vertical spread on TOS I go
- Call1: long Call @ 230 (prem: $19.6) and
- Call2: short call @ 235 (prem: $17)
Its on a 30 day option (weekly) set to expire on 24 Apr (32 days from today)
So here are my calcs
7
If the market goes to 220: (as both expire)
lose -$1960 premium, gain $1700 -> net = -$260

If the market goes to 233: (as call1 exercised, call2 expire)
lose -$1960 premium, gain $300, gain $1700 -> net = +$40

If the market goes to 240: (as both exercised)
lose -$1960 premium, gain $1700, gain $1000 on call1, lose -$500 on call2 -> net = $240

Therefore my max profit is $240 and max loss is $-260

Thank you

Your answers are correct but I wouldn't describe the way you do.
Below $230 is your max loss - you lose premium (19.6-17) $2.60 * 100 = $260
Above $350 is your max gain - you make $5, verses premium of $2.60 so (5-2.6)8100 = $240

Interesting that with the stock at 230 that the 230/235 call spread has a less than 50/50 win/reward!

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  #13 (permalink)
 semiopen 
hillsborough nj
 
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futs View Post
Watch their videos and take their options course to learn the Greeks.

Sent using the NexusFi mobile app

When they were first designing listed options, they needed to know the hedge ratio. That was solved by Black and Scholes, which was a remarkable advance in the 70s. A binomial model is simpler to understand I think. An ATM option should have a hedge ratio of .5, that is the option will move about $0.50 for each $1 move in the stock over short distances.

Hedge ratio was a great term but then it got spoiled by changing the name to delta and then using 3 other greek letters for more trivial stuff that is probably close to worthless. The academics gave them greek letters so normal people can't type them.

Learn hedge ratios.

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Last Updated on May 2, 2020


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