The following, like all of our strategy discussions, is strictly for educational purposes. (Need a refresher? Read about the basics of vertical spreads and selling vertical credit spreads.) Ready to see it in action? Let’s start with a vertical spread-the purchase of a call or put option, paired with the sale of another call or put of the same expiration month, but with a different strike. From the basic long call option to a complex, multi-leg ratio spread, think of the Risk Profile as the Swiss Army knife of options analysis. Not only can it provide a single visual risk snapshot, but it can also help you estimate changes in a trade’s profile given certain changes in risk components such as time and volatility. If you ’re an option trader using the thinkorswim ® platform from TD Ameritrade, odds are you ’ re familiar with the Risk Profile tool. Adjust the parameters, such as time and implied volatility, to analyze a position in various scenarios.Learn to read the tool’s visual display. Set up and analyze an options spread using the Risk Profile tool.
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