Options & Positions Explanations

In the Silver Membership, we work with several types of trades – below you will see the list of the types I normally use and why.

The CBOE has a great pdf called Mastering Option Strategies if you’d like to learn more

LONG CALLS and LONG CALL SPREADS– bullish positions – I expect price action to hold a bullish range

Format – LONG (number of positions) (instrument/ticker) (month of expiration) strike CALLS @ (price)…..

Example – LONG 3 AAPL JUL 400 CALLS @ $4.90 – this means I have bought the calls for $490. The LONG CALL SPREAD will buy the lower price strike and sell the higher price strike for a certain price……

Example – LONG 3 AAPL JUL 400/405 CALL SPR @ $2.90 means I bought the bullish call spread for $290 for each call spread

The positions above will be a debit – meaning it will pull money out of your trading account to complete the transaction

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OTHER BULLISH POSITIONS – SHORT PUTS, SHORT PUT SPREADS & SYNTHETIC LONG POSITIONS, BULLISH VERTICAL COMBO

FormatSHORT PUTS AND SHORT PUT SPREADS – SHORT (number of positions) (instrument/ticker) (month of expiration) strike PUTS @ (price)…..

Example – SHORT 3 AAPL JUL 400 PUTS @ $4.90 creates a credit in your trading account but increases margin requirements for the position. I will normally sell puts in low priced stocks or stocks we would like to build a long position

SHORT PUT SPREAD – Example – SHORT 3 AAPL JUL 405/400 PUTS SPR @ $2.90 means that I have sold the higher strike price and bought the lower price strike and it will deliver a credit to my trading account of $290 per put spread and also create a margin withdrawal for the difference between the $5 and $2.90 collected

SYNTHETIC LONG SPREAD – I expect a strong bullish slant to the stock – it is the combination of a LONG CALL SPREAD and a SHORT PUT SPREAD for a debit – a true synthetic long will approximate 100 delta – so these will be rare.

Format – LONG (number of positions) (instrument/ticker) (month of expiration) strike bought/strike sold CALL SPR & SHORT (number of positions) (instrument/ticker) (month of expiration) strike sold/strike bought PUT SPR @ (price)…..

Example – LONG 2 AAPL JUL 400/405C /390/385P @ $2.10 means that I have positioned a long call spread and a short put spread together – all synthetics will create a debit spread. There is a margin requirement here as well

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LONG PUTS and LONG PUT SPREADS-bearish positions – I expect price action to hold a bearish range

Format – LONG (number of positions) (instrument/ticker) (month of expiration) strike PUTS @ (price)…..Example – LONG 3 AAPL JUL 400 PUTS @ $4.90- this means I have bought the puts for $490.

The LONG PUT SPREAD will buy the first strike and sell the second for a certain price….. Example – LONG 3 AAPL JUL 400/405 PUT SPR @ 2.90 means I bought the higher price strike and sold the lower price strike creating the bearish spread and paid $290 for each put spread

SYNTHETIC SHORT SPREAD – I expect a strong bearish slant to the stock – it is the combination of a LONG PUT SPREAD and a SHORT CALL SPREAD for a debit

Format – LONG (number of positions) (instrument/ticker) (month of expiration) strike bought/strike sold PUT SPR & SHORT (number of positions) (instrument/ticker) (month of expiration) strike sold/strike bought CALL SPR @ (price)…..

Example – LONG 2 AAPL JUL 405/400P /385/390C @ $2.10 means that I have positioned a long put spread and a short call spread together – synthetic shorts will create a debit spread. There is a margin requirement here as well

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DIRECTIONLESS OR RANGE BOUND POSITIONS – IRON CONDOR, BUTTERFLY, CALL CONDOR, PUT CONDOR

Here is the CBOE explanation for many of these – http://www.cboe.com/learncenter/pdf/masteringoptionsstrategies.pdf