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- What are the pros and cons of selling vertical call spreads as opposed to put spreads? (If any) I mean why would I sell puts over calls per se, or vice versa?
- What is a "good" IV (makes sense to) percentile to sell a vertical PUT?
- What is a "good" IV (makes sense to) percentile to sell a vertical CALL?
Thanks !
To call or to put
Selling a call spread is a bearish play. Selling a put spread is bullish.
Look for IV above 50% to collect more premium. Volatility at extremes tends to revert to the mean (the middle or 50%) over time. So selling above 50% gives you more premium and then it tends to get cheaper to buy back as it moves back to 50%. Of course IV could expand....it is just more likely to revert to the mean than to expand.
To set up a trade and get a visual layout of where you profit/losses occur as well as you break evens simply set the trade up in your TOS "Analyse/Risk" tab. Dough.com has a very visual display if you set it up in their trade window. After using dough for a while I got to the point that I don't hardly use it anymore as I can see the layout in my head when I look at any options chain. Some people are just much more visually oriented and it really helps to see it laid out that way.
In the trade above PZZA, it is losing money. So f I was to just let it expire (consider it stays OTM) would the negative "dissapear" and tge account balance gets tge max profit added to it ?
Reason I am asking is, yes it is losing money, which is being deducted from mt account balance, but if it expire worthless...... what happens?
Does it make sense to hold in to is because of fhe time value?
I did listen to ur advice of sticking to paper money, but a little too late..
So sticking to paper for a few months.. not making the mistake of trying to make the market "pay me back" and make rash decisions
Oh yea, im nit quitting either
Thanks
The position is fine this far out of the money for now. Currently you have a 75% chance of it expiring worthless. Which is good. The closer to expiration you get the more the theta will decay and it will start to turn around.
The problem you are seeing is the lack of liquidity. You can drive a truck through the bid/ask spread. So the moment you bought it you were probably at more of a loss than you are now. Try to find stocks that trade at least 1 mil shares a day maybe even 2 mil for cheaper stocks.....but even more important look at the "at the money" strikes and make sure the bid/ask is pretty close. (.05-.10 maybe more on the more expensive stuff.) Right now there is a 2.50$ difference between the bid/ask of the first out of the money calls. This is highly hard to trade and make anything in there.
So, hate to sound like a broken record, but trying to get a good grip around this.
On a Thursday, if my account balance is 1000, and the PZZA shows p/l open - 229, and it expires like that, will the account balance then be 1229 (after the settlement) ?
Thanks
