eBook 2: Introduction to Advanced Options Spreads

eBook 2: Introduction to Advanced Options Spreads

Table of Contents

 

Introduction to Advanced Options Spreads - Pages 6 - 15
 

I. Rationale for Trading Options Spreads - to allocate risk among market movement, changes in implied volatility, and time decay

     (a) Spread structure determines risk allocation

     (b) Objective is to initiate an options spread that matches your market outlook

 

II. Implied Volatility (IV) versus Statistical Volatility (SV)

     (a) Undervalued options - price < value; IV% < SV%; IV Pctl < 50
     (b) Overvalued options - price > value; IV% > SV%; IV Pctl > 50

 

III. OptionVue Analytical Software
     (a) Price & Volatility Chart
     (b) Matrix
     (c) Graphic Analysis

 

IV. The Greek Variables

     (a) Delta

     (b) Gamma

     (c) Theta

     (d) Vega

 

Directional Strategies - Premium Buying (Long Premium) Spreads - Pages 16 - 36

 

I. Vertical Debit Spreads

     (a) Bull Call Spread

     (b) Bear Put Spread

 

II. Calendar Spreads

     (a) Bullish OOM Call Calendar Spread

     (b) Bearish OOM Put Calendar Spread

 

III. Diagonal Calendar Spreads

     (a) Bullish Diagonal Calendar Call Spread

     (b) Bearish Diagonal Calendar Put Spread

 

IV. Ratio Backspreads

     (a) Call Ratio Backspread

     (b) Put Ratio Backspread

 

V. Vertical Swaps

     (a) Bullish Vertical Call Swap
     (b) Bearish Vertical Put Swap

 

Directional Strategies - Premium Selling (Short Premium) Spreads - Pages 37 - 57

 

I. Vertical Credit Spreads

     (a) Bear Call Spread

     (b) Bull Put Spread

 

II. Reverse Calendar Spreads

     (a) Bearish OOM Call Reverse Calendar Spread

     (b) Bullish OOM Put Reverse Calendar Spread

 

III. Reverse Diagonal Calendar Spreads

     (a) Bearish Diagonal Calendar Call Spread

     (b) Bullish Diagonal Calendar Put Spread

 

IV. Ratio Spreads

     (a) Call Ratio Spread

     (b) Put Ratio Spread

 

V. Vertical Swaps

     (a) Bearish Vertical Call Swap
     (b) Bullish Vertical Put Swap

 

Non-Directional (Delta Neutral) Implied Volatility Strategies - Hedged (Covered) Spreads (forecasting implied volatility, not market direction) - Pages 58 - 77

 

I. Long ATM Straddle

 

II. Long Strangle


III. Dual Ratio Backspread

 

IV. ATM Calendar Spreads

     (a) ATM Call Calendar Spread

     (b) ATM Put Calendar Spread

 

V. ATM Reverse Calendar Spreads

     (a) ATM Reverse Call Calendar Spread

     (b) ATM Reverse Put Calendar Spread

 

VI. Reverse Strangle Swaps
     (a) Positive Vega
     (b) Negative Vega
     (c) Neutral Vega

 

Non-Directional (Delta Neutral) Implied Volatility Strategies - Naked (Uncovered) Spreads (forecasting implied volatility, not market direction) - Pages 78 - 91

 

I. Short ATM Straddle

 

II. Short Strangle

 

III. Dual Ratio Spread

 

Statistical Volatility Strategies (forecast a range where you expect the market will be) - Pages 92 - 110

 

I. Neutral Strategies

     (a) ATM Iron Butterfly
     (b) Close-to-the-Money Iron Condor

 

II. Bullish Strategies
     (a) OOM Call Butterfly

     (b) OOM Call Condor

 

III. Bearish Strategies

     (a) OOM Put Butterfly

     (b) OOM Put Condor

 

Strategies Not Affected by Implied Volatility - Pages 111 - 125

 

I. ATM Iron Butterfly Swap
     (a) Front month Iron Butterfly along with deferred month Reverse Iron Butterfly - positive theta and negative gamma - Bearish Vertical Call Swap along with Bullish Vertical Put Swap

     (b) Front month Reverse Iron Butterfly along with deferred month Iron Butterfly - negative theta and positive gamma - Bullish Vertical Call Swap along with Bearish Vertical Put Swap

 

II. Iron Condor Swap

     (a) Front month Iron Condor along with deferred month Reverse Iron Condor - positive theta and negative gamma - Bearish Vertical Call Swap along with Bullish Vertical Put Swap

     (b) Front month Reverse Iron Condor along with deferred month Iron Condor - negative theta and positive gamma - Bullish Vertical Call Swap along with Bearish Vertical Put Swap

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