Bull-Put Credit Spreads Explained Diagonal Spreads: Care and Feeding...

download Bull-Put Credit Spreads Explained Diagonal Spreads: Care and Feeding ¢â‚¬¢Diagonal spreads work very much

of 10

  • date post

    25-Aug-2020
  • Category

    Documents

  • view

    1
  • download

    0

Embed Size (px)

Transcript of Bull-Put Credit Spreads Explained Diagonal Spreads: Care and Feeding...

  • InvestorsObserver Workshop

  • InvestorsObserver Workshop • Market update • What’s going on at InvestorsObserver: • Member-driven content: Questions, site demonstrations,

    etc. • Can prepare slides for questions submitted ahead of

    time: Mention “workshop”

  • S&P 500

  • Major indices

  • Drilling down

  • What else is going on? • PPI was higher than expected today, another sign that inflation is rising • Trade: New tariffs announced, still waiting for China to respond • What’s working: Small caps and tech

  • Diagonal Spreads: Care and Feeding • Diagonal spreads work very much like covered calls

    • You can keep selling calls until the bought leg expires

    • Just remember that you ideally want the net debit to be less than the strike width

    • Net Debit: The sum of all the legs (debits minus credits)

    • The hard part is timing, and picking a strike • You don’t want a strike that is too low • You also don’t want to sell a call that doesn’t

    bring in any money

  • SQ Diagonal

    $18.00

    Strike Width stays the same Net Debit drops, increasing target profit from $1.00 to $1.92

  • HON Diagonal

    $28.60

    Strike Width shrinks from $30 to $28 Net Debit drops to $27.90, reducing target profit from $1.40 to $0.10

  • KRE diagonal

    $17.10

    Strike Width shrinks from $30 to $28 Net Debit drops to $27.90, reducing target profit from $1.40 to $0.10

    $16.40

    Strike Width shrinks from $18 to $17.50 to $16.50 Net Debit drops to $17.10 to $16.40 to $15.78 Target profit goes from $0.90 to $1.10 to $0.72