Diagonal Spread
A Diagonal Spread is an option spread where the trader buys a longer-term option and sells a near-term option. The inverse could also be considered a diagonal spread, however, the longer-term option is margined as...
Definitions
Peter Stolcers Synthetic Put
Option traders often construct synthetic put positions to hedge their short stock positions. When you are short stock, your risk is theoretically limitless. Consequently, option traders buy calls to protect the position from a large...
Synthetic Call Option
In a Synthetic Call Option, the investor can create a pseudo call position by buying puts that equal the number of shares they own. Just like a call buyer can buy in-the-money, at-the-money, out-of-the-money options,...
Married Puts
In a married puts option strategy, the investor owns shares of stock and purchases an equal number of put options. Once the stock rises by more than the purchase price of the put option, the...
4-Way Option Spread
A 4-Way Option Spread is the same as an iron condor spread. The option strategy sells an out of the money put spread and an out of the money call spread at the same time....
Butterfly Spread
In a Butterfly Spreadstrategy, all of the expiration months are the same. A trader buys a call with a low strike price, sells two calls at the next strike and finally buys a call above...
Iron Condor Spread
An iron condor is typically a non-directional option spread where the trader sells an out of the money call spread and an out of the money put spread ("the wings") in an effort to collect...
Option Spread
An option spread is created when a trader simultaneously buys and sells options with different strike prices and/or expiration months. A vast variety of strategies can shape the risk and reward of the trade. Simple...
Accelerated Time Decay
Accelerated Time Decay refers to options that have less than a month to maturity decay at an accelerated rate. As time passes, the probability of the stock making a major move decreases. A stock has...
Time Premium Decay
Stock options are a wasting asset. From the day you purchase them, their value goes down if the stock stays flat. This is called the Time Premium Decay. Out of the money options are 100%...