The Practical Way

Wednesday, 8th September 2010

Bearish Spreads

Written by George Traganidas Topics: Articles, Options, Wealth Building

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Fool.com
By Jeff Fischer
February 11, 2010

Why use bearish spreads?

• To profit on a falling stock or index while capping your risk.
• To earn strong percentage returns on a moderate move in an underlying investment.
• To lower the cost of bearish put option purchases.[...]

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Wednesday, 8th September 2010

Bull Call Spreads

Written by George Traganidas Topics: Articles, Options, Wealth Building

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Fool.com
By Jim Gillies
August 25, 2009

Why use bull call spreads?

• Capital gains: To profit on a stock you feel relatively bullish on.
• Defense: To limit your capital at risk and lower your break-even point compared with just buying calls alone.
• Leverage: To land an oversized potential return on your net cost, although you sacrifice additional upside.[...]

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Wednesday, 8th September 2010

An Introduction to Spreads

Written by George Traganidas Topics: Articles, Options, Wealth Building

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Fool.com
By Jeff Fischer
February 11, 2010

Why use spreads:

• To profit on the movement in a stock while capping your potential loss at a pre-determined amount — though you cap your potential profit as well.
• To purchase options with less cash up-front, which in turn helps leverage your potential returns.
• To earn sizable percentage gains even on modest moves in the underlying stock.[...]

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Wednesday, 8th September 2010

Writing Straddles

Written by George Traganidas Topics: Articles, Options, Wealth Building

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Fool.com
By Jeff Fischer
November 18, 2009

Why write a straddle?

• You believe a stock or index is going to hold steady or stay in a tight range.
• You believe a stock that was recently volatile will settle down considerably.
• You believe the market’s overall volatility is going to decrease.[...]

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Wednesday, 8th September 2010

Buying Straddles

Written by George Traganidas Topics: Articles, Options, Wealth Building

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Fool.com
By Jeff Fischer
October 7, 2009

Why buy a straddle?

• You believe a stock or index will move dramatically, but you don’t know which way.
• You believe volatility will increase in general, so the value of the options you’re buying will increase.
• You want to leverage potential returns when the underlying investment moves meaningfully in either direction, but limit your risk.[...]

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Wednesday, 8th September 2010

Strangles

Written by George Traganidas Topics: Articles, Options, Wealth Building

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Fool.com
By Jeff Fischer
March 12, 2010

Why use strangles?

• You buy (“buy to open”) a strangle to profit on a sharp move in a stock, whether up or down.
• You write (“sell to open”) a covered strangle to profit when a stock stays within a wide range — or, if it doesn’t, to get a better buy price on new shares or a higher sell price on existing shares.[...]

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Wednesday, 8th September 2010

Diagonal Calls

Written by George Traganidas Topics: Articles, Options, Wealth Building

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Fool.com
By Jim Gillies
September 28, 2009

Why use diagonal calls?

1. If you’re mildly bullish on a stock and want to generate income from a leveraged investment.
2. To profit from a range-bound stock.
3. If your underlying stock is chosen well, and you’re handed a little market luck, you can wake up a year or two hence with a significantly in-the-money call option that effectively costs you nothing.[...]

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Wednesday, 8th September 2010

Stock Repair

Written by George Traganidas Topics: Articles, Options, Wealth Building

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Fool.com
By Jeff Fischer
August 10, 2009

Who should use the stock repair strategy? Someone who is:

• Down 15% to 25% on a stock and willing to forego profits to sell at breakeven.
• Not interested in averaging down or holding for the long haul.
• Using a margin-approved account and can write call options.[...]

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Wednesday, 8th September 2010

Synthetic Shorts

Written by George Traganidas Topics: Articles, Options, Wealth Building

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Fool.com By Jeff Fischer August 10, 2009 Feeling bearish? If you’re looking to profit when stock prices slip, there’s a way to use options to mimic shorting a stock — but with distinct advantages. To set up this “synthetic short” position, you sell a call option and simultaneously buy a put option, using the same [...]

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Wednesday, 8th September 2010

Synthetic Longs

Written by George Traganidas Topics: Articles, Options, Wealth Building

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Fool.com
By Jeff Fischer
August 10, 2009

Are you confident about a stock, but reluctant to pony up the cash to buy it today? A synthetic long may be just the ticket.

This option strategy works nearly the same as owning the underlying stock outright — except you don’t need to pay up front. Usually, you’ll set up a synthetic long on a stock if you foresee a strong catalyst for appreciation in the next 18 months or so. As the stock price goes up, your options gain value along with it, sometimes to a much greater degree.[...]

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