Strategic Betting With Vertical Options

Oftentimes traders and investors get stuck where they have a position in the stock, or want to initiate one, but aren’t sure when the move will occur.  Vertical options offer a great way to get paid while you wait.

After hours of in-depth analysis you finally decide to take a position in a stock that you’re certain will go higher, once everyone sees what you do.  Day by day, you watch it languish.  Weeks turn into months.  Finally, after a while you give up, only to watch it take off the day after you sell it.  Unfortunately, unless the stock pays a nice dividend, the opportunity cost of holding a position that doesn’t move can be just as detrimental as quick losing trades.

However, consider the same investment, but part of the position you take an initiate as a vertical option at the lower end of the range.  You sell a put spread (which we’ll discuss later) and roll it each month, collecting some serious coin in between.  Vertical spreads allow you to take the place of the institutions and sell options with a more defined and limited risk than naked options.  You can define the exact amount you want to risk, and even get your risk reward to 1:1 for every trade.

June 24, 2019