What is a Vertical Call Spread?

A Vertical Call Spread allows the trader to sell premium in an underlying with a bearish (declining price) outlook. Unlike a Naked Call, however, Vertical Call Spreads are defined risk trades with lower maximum profit potential and usually a significantly lower margin requirement.

What is a Naked Put?

This is the most basic trade you can place if you’re selling premium and expect the price of the underlying to increase. It offers the trader a maximum potential profit on the undiluted premium sold for a high, but defined profit. In turn though, the risk is technically unlimited and the margin requirement is high.

What is a Naked Call?

This is the most basic trade you can place if you’re selling premium and expect the price of the underlying to decrease. It offers the trader a maximum potential profit on the undiluted premium sold for a high, but defined profit. In turn though, the risk is technically unlimited and the margin requirement is high.

What is a Straddle?

What is a Straddle?

Short Straddles are extremely neutral positions. They offer a very low chance of a very large gain and expose the trader to unlimited risk of loss in both directions of potential price movement. Short Straddles are high risk trades with a large margin requirement.

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What is a Butterfly?

What is a Butterfly?

Butterfly trades are used for a neutral price outlook with very minimal movement expected over the duration of the trade through expiration. The “sweet spot” is where the trade expires at the exact same underlying price as at open.

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What is a Strangle?

What is a Strangle?

A short Strangle is a neutral position for a trader who is very certain of their analysis and outlook. Profits are relatively high because of the undefined risk, but so too are the losses. Losses quickly accumulate as the underlying price moves away from…

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What is a Butterfly?

What is an Iron Butterfly?

Iron Butterfly trades are used for a neutral price outlook with very minimal movement expected over the duration of the trade through expiration. Compared to an Iron Condor, Iron Butterfly trades have higher defined maximum potential profits, though this…

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What is an Iron Condor?

An Iron Condor is a neutral price outlook trade structure that generally gives the trader a good chance of a small gain with limited risk. The maximum potential profit can be realized over a range of spot price movement above and below…

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