A Calendar spread is an options or futures spread established by simultaneously entering a long and short position on the same underlying asset but with different delivery months. The neutral calendar spread strategy involves buying long term calls and simultaneously writing an equal number of near-month at-the-money or slightly out-of-the-money calls of the same underlying … [Read more...]
Synthetic Long Put
A synthetic long put is created when short stock position is combined with a long call of the same series. The synthetic long put is so named because the established position has the same profit potential as long put. Futures and options traders can create a trading vehicle, through a combination of futures and options, that replicates another trading instrument. You may wonder … [Read more...]
Variance Swap [Explained]
A variance swap is a useful tool while investing. It is a financial derivative which allows one to speculate on or hedge risks associated with the magnitude of volatility, of some underlying product, like an exchange rate, interest rate, or stock index. One aspect of the swap will pay an amount based upon the realized variance of the price changes of the underlying product. … [Read more...]
Short Condor
The short condor is a strategy very similar to the short butterfly. It is a limited risk, limited profit trading strategy that is structured to earn a profit when the underlying stock is perceived to be making a sharp move in either direction. Using calls, the options trader can setup a short condor by combining a bear call spread and a bull call spread. The trader enters a … [Read more...]
Long Condor
The condor option strategy is a limited risk, non-directional option trading strategy. It has been structured so as to earn a limited profit when the underlying security is perceived to have little volatility. The trader can implement a long condor option spread by writing a lower strike in-the-money call, buying an even lower striking in-the-money call, writing a higher strike … [Read more...]