THE OPTIONS COURSE- Introducing Vertical Spreads
THE OPTIONS COURSE Introducing Vertical Spreads Since all markets have the potential to fluctuate beyond their normal trend, it is essential to learn how to apply strategies that limit your losses to a manageable amount. A variety of options strategies can be employed to hedge risk and leverage capital. Each strategy has an opti mal set of circumstances that will trigger its application in a particular market. Vertical spreads are basic limited risk strategies, and that’s why I tend to introduce them first. These relatively simple hedging strategies en able traders to take advantage of the way option premiums change in rela tion to movement in the underlying asset. Vertical spreads offer limited potential profits as well as limited risks by combining long and short options with different strike prices and like expi ration dates. The juxtaposition of long and short options results in a net debit or net credit. The net debit of a bull call spread and a bear put