A ‘Time Spread,’ also called a Calendar Spread or a Horizontal Spread, involves the use of multiple options of the same type (either all calls or all puts), with the same strike price but different expiration dates. Generally traders will sell a near-term option (take a short position) and buy a far-term option (take a long position). The strategy is virtually identical whether calls or puts are used. Continue reading...
A time spread using call options is a strategy that buys and sells the same number of options with the same strike prices, but different expirations. Time spreads are sometimes called calendar spreads or horizontal spreads. They make money based on the time decay of the options being shorted. Two calls are used: one is shorted and one is purchased, and both have the same strike price and same underlying security. Continue reading...
A put time spread is an options strategy that has the investor implementing a short put and a long put at the same strike price, but with different expirations. Time spreads can also be called calendar spreads or horizontal spreads. A put time spread will use two put contracts on the same underlying security but with different expiration dates. One of the puts will be sold short, and one will be held long (this is the nature of spreads). Continue reading...
Spread has several meanings in finance, but the most general usage is to describe the difference between the bid and the ask prices for a security, where a narrower spread would indicate high trading volume and liquidity. It also might refer to a type of options strategy in which an investor purchases two calls or two puts on the same underlying security but with different expiration dates or strike prices. Continue reading...
Ratio call spreads are options strategies where the investor combines purchased calls and short calls at the same expiration but with different strike prices. A Ratio Call Spread starts off as a delta-neutral strategy, which means that even if you have two long calls and one short call, the sensitivity of your overall position to move in the underlying is equal whether it moves up or down by small amounts. Continue reading...
Credit Spread is an indication of the default risk perceived in corporate bonds at the current time. The credit spread is the difference between the yield on the safest bonds and the riskiest bonds. How much does it cost corporations to issue bonds, in terms of the yield expected by investors in the current market? Typically, a higher spread indicates a more unstable economy. Buyers of large quantities of bonds tend to insure their purchases, and the cost of the insurance is usually reflected in so-called CDS's (Credit Default Swaps). The more expensive the CDS's are, the more risky it is to purchase the bond. Continue reading...
Times Interest Earned (TIE) is also known as the interest coverage ratio, is a cash-flow analysis that compares the pre-tax earnings of a company to the total amount of interest payable on their debt obligations. A healthy ratio indicates that a company will probably not default on loan repayments. To compute this ratio, divide a company’s annual income before taxes by their annual interest payments on debt obligations. This ratio is not concerned with the actual principal due on loans since the principal amount is already pegged to some of the assets on the books of the company, and other fundamental equations will already factor that in. Continue reading...
A Vertical Spread involves the strategy of buying and selling an equal number of options on the same underlying security with the same expiration date, but different strike prices. Vertical Spreads can be both bullish and bearish, depending on your view of the underlying security. If you use calls, you are constructing a Vertical Bull Spread, and if you’re using puts, you’re constructing a Vertical Bear Spread. Continue reading...
A calendar spread is a strategy also known as a horizontal spread or time spread, in which the investor uses two options contracts, with the same strike price, on the same underlying security, but with different expiration dates. The trader will “write” (sell) the near-term one (front month) and hold the one with the more distant expiration date (back month) long. This is a debit spread, since the investor will pay more to establish this position than is received from the short sale of the near-term option: longer-term options have a greater time value than short-term options. Continue reading...
A bull call spread is a vertical spread that buys and sells calls in a way that benefits from upward price movement but limits the risk of the short position. Using calls options of the same expiration date but different prices, a bull call spread seeks to maximize profits for moderate price movements upward. A long position is taken in a call contract (meaning it is bought and held) that has a strike price near the current market price of the security or is at least lower than the other call contract used in this strategy. Continue reading...
A bull put spread is used when an investor thinks the price of a security is set to rise modestly. The strategy involves buying one put option on the security while simultaneously selling another put option at a higher strike price. A Bull Put Spread is usually a vertical spread, meaning the two options used have the same expiration date (and different prices). The lower-strike put option is bought and held long, while the higher-strike option is sold short. The short position sold will be at or just below the current market price for the security, and the long position will be at a lower strike price than the short position. Continue reading...
A bear put spread involves the use of two puts, one sold and one bought, at different strike prices, with the intention of profiting from declines in the underlying stock. A Bear Put Spread uses two put contracts, one long and one short, in such a way to achieve a maximum profit from modest downward movements in the underlying stock. A long put is purchased a strike price nearer the money that the short put contract. Continue reading...
Option strategies are implemented by investment professionals to profit from the price movement of an underlying strategy, and can also be used as a hedge against losses or to preserve profits. Various option strategies have been developed over the years to take advantage of the behavior of the underlying assets. Some of these are designed to be conservative, and others are intended to be aggressive. Sometimes these strategies are known by epic-sounding names such as Iron Butterfly and Iron Condor. Continue reading...
There will be a premium paid by investors for the right to establish positions using options. The price of the underlying security must move to a certain point for the options position to become profitable. The strike price of an options contract names the price that an investor can use to buy or sell the underlying security, but the breakeven price will be the strike price plus the amount of the investor’s premium or net debit. Breakeven price can apply to a multi-option strategy such as a spread, or to a single option position. Continue reading...
There’s no reason why you shouldn’t be able to choose investments that are suitable and beneficial for you, without a personal investment advisor, if you’re willing to learn. There is an abundance of information out there, and if you have some discernment you are likely to be able to find investments which will serve their intended purposes for you. You may have heard that there are different investment objectives: preservation of capital (avoiding the risk of losing money - especially which keeps up with inflation), growth, income, and mixtures of these. Continue reading...
The best way to make money with pattern trading is to use our premium tool, Real Time Patterns (RTP Stocks, ETFs) You will get real time signals to buy and/or sell stocks or ETFs based on intraday price information. RTP analyzes 39 types of patterns for stocks, penny stocks, and ETFs in real time with the following time-frames: 5min, 15 min, 30 min, 1hour, 4 hours, and 1 day. To access, from the menu bar, simply click the Trading tab, then click on Real Time Patterns. Continue reading...
Bond yield is a measure of the return on investment for bonds, and there several kinds of yield that can be computed. Yield on a bond is the amount of interest that it pays annually, as a percentage of the amount invested — at least, this is the most common type of yield discussed, which is known as Current Yield. If a bond pays quarterly or monthly income to the investor, these payments are totaled up and divided by the amount invested. Continue reading...
IRS Link to Form — Found Here If a person moves from his first-purchased home, or it is destroyed, and he took the first-time homebuyer credit at purchase, he may have to repay the credited amount if the home was sold or destroyed within 36 months. He must file a 5405 and begin making payments in the form of additional taxes going forward. Form 5405 is the filing for those who sell their home or see it destroyed within 36 months of receiving the first-time homebuyer tax credit. The First Time Homebuyer Look-Up Tool is an IRS database allowing consumers to see all relevant information about when they took the FTHBC and how much they might owe back if they no longer used it as a primary residence within 36 months. Continue reading...
Generally, you should choose an allocation that makes sense for your situation. There are many ways you can choose to invest, but there is no definite answer. General rules focus on diversification of assets and strategies that change with age. Many brokerage companies will have questionnaires and model portfolios that can point you in the right direction. The principles you use to invest your IRA assets are no different from principles you use for any other investments: time horizon, risk tolerance, and your intentional use of the money will all help you arrive at strategies that will be appropriate for you. Continue reading...
Pre-Holiday price fluctuations have been observed in many instances, but there a difference of opinion as to whether the markets are higher or lower just before holiday. Pre-Holiday Seasonality is the idea that prices will rise or fall before a holiday weekend in which the market will be closed for a day. When researching this phenomenon you may find colloquial wisdom stating that prices always rise before a holiday, but in actuality most of the evidence points the opposite direction: prices are most likely to close lower the day or two before a holiday weekend, and may remain low the day after the holiday, but this provides a possible opportunity to ride the upswing. Continue reading...