A type of options strategy used when a moderate rise in the price of the underlying asset is expected. It is achieved by purchasing call options at a specific strike price while also selling the same number of calls of the same asset and expiration date but at a higher strike. The maximum profit in this strategy is the difference between the strike prices of the long and short … [Read more...]
Call Back Spread- Options Trading
The call backspread is an investment strategy that involves selling a call at one strike price at a lower rate and then purchasing two calls at a higher strike price. This approach provides the call ratio backspread with a built in hedge component that is very likely to result in breaking even for the investor, and possible even realizing a small profit. The call backspread … [Read more...]
Short Put : Option Trading Explained
Writing a put obligates you to buy the underlying stock at the strike price any time until expiry if you are assigned. short put is created when long stock position is combined with a short call of the same series. It is so named because the established position has the same profit potential a short put. Limited Profit Potential The formula for calculating maximum profit … [Read more...]
Ulcer Index -The Basic Concept
The Ulcer Index measures the "stress" of holding a trade or investment by measuring price retracements. The Ulcer Index is based on the notion that downward volatility is bad, but upward volatility is good. Unlike standard deviation, the financial industry's benchmark way of measuring the risk of a stock, which equally weights both violent increases to the upside (upside … [Read more...]
How to Calculate Relative Strength Index?
Calculation of RSI A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. It is calculated using the following formula: RSI = 100 - 100 ______ 1 + RS RS = Average of x days' up closes / Average of x days' down closes As you can … [Read more...]