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For example, a bull-call spread involves the simultaneous purchase and sale of call options with the same expiration date but with different strike prices. This is especially so for sellers of calls who take on theoretically unlimited risk. This $1000 differential represents your net debit - which is also the maximum possible loss on the trade. In the case bull spread, the options trader is banking on a moderate price increase in the underlying security. How quickly these options express themselves is a measure of market volatility, and most options traders will try to take a neutral position - they'll put in put and call options to cover both directions, and to cover themselves against broad market trends. Many sophisticated investors will tell you that a bull spread is among the most conservative option strategies in practice. Along with locking in a price, options also states the number of currency units that must be sold. Options arbitrage is a lower risk strategy done by floor traders, and can be short term profitable, with good liquidity. An option is a derivative, meaning its price is based on an underlying asset. So, a chart that is showing a bullish bias would be better suited for a bull call or bear put spread. On its surface, the bull spread options strategy appears to be a slow but sure way of making money. The option will expire at the close of trading on the third Friday of that month. Once used only by major banks and corporations, brokers now offer this service to individual traders. These underlying assets can either be stocks, ETFs or Indexes. As I said, the trader is banking on a moderate price increase in the underlying security. The key to options trading is market research on specific stocks; an options trader will be researching stocks that are either slated for a price spike (call options) or are likely to undergo a price decline (put options). In bullish markets, the most popular spreads are Bull Call debit spread or a Bull Put credit spreadIn bearish markets, the trader would then deploy a Bear Put debit spread or Bear Call credit spread. Online options trading eliminate the need for face to face option trading. Buying a call is the basic method of options trading expecting an upward (price) movement in a particular stock before the option expires. Forex options lock the price of a currency for a certain amount of time. "Mar" stands for March, so this option will expire on the third Friday of March 2006, which is next week. This $1000 differential represents your net debit - which is also the maximum possible loss on the trade. Options arbitrage is a lower risk strategy done by floor traders, and can be short term profitable, with good liquidity. Forex options are one method of invest forex traders can use to make money. More advanced options traders can use the options pricing model to focus on certain elements of risk. An options trader can create a spread position by buying and selling equal number of options of the same class the same underlying security but with different strike prices or expiration dates. A position that uses a combination of different strike prices and expiration months is often called a diagonal spread.
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