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The calendar call spread (see calendar spread) is a bullish strategy and consists of selling a call option with a shorter expiration against a purchased call option with an expiration further out in time. The calendar call spread is basically a leveraged version of the covered call (see above), but purchasing long call options instead of ...
Example: Stock ABC is $20, and a $22.50 call that expires in two years costs $6, while a $22.50 call that expires in three months pays $0.75. Setting up this trade costs a net debit of $5.25, or a ...
If gold for August delivery is bid $1601.20 asking $1601.30, and gold for October delivery is bid $1603.20 asking $1603.30, then the calendar spread would be bid -$2.10 asking -$1.90 for August–October. Calendar spreads or switches are most often used in the futures markets to 'roll over' a position for delivery from one month into another month.
For example, the two assets could be crude oil and heating oil; trading such an option might be of interest to oil refineries, whose profits are a function of the difference between these two prices. Spread options are generally traded over the counter, rather than on exchange. [1] [2] A 'spread option' is not the same as an 'option spread'.
The spread between 2 and 10-year Treasuries has been inverted since last July. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, rose 3.6 basis ...
For example, one uses a credit spread as a conservative strategy designed to earn modest income for the trader while also having losses strictly limited. It involves simultaneously buying and selling (writing) options on the same security/index in the same month, but at different strike prices. (This is also a vertical spread)
A long butterfly options strategy consists of the following options: Long 1 call with a strike price of (X − a) Short 2 calls with a strike price of X; Long 1 call with a strike price of (X + a) where X = the spot price (i.e. current market price of underlying) and a > 0. Using put–call parity a long butterfly can also be created as follows:
For example, if a risk-free 10-year Treasury note is currently yielding 5% while junk bonds with the same duration are averaging 7%, then the spread between Treasuries and junk bonds is 2%. If that spread widens to 4% (increasing the junk bond yield to 9%), then the market is forecasting a greater risk of default, probably because of weaker ...