Vertical Spread

How a Risk Reversal Options Strategy Works January 10, 2024 1:00 PM   |  

Having a risk reversal options strategy provides downside protection to the level of the purchased put option but limits the upside potential of a long stock position to the strike of the short call option. Here's how this strategy works.

4 min read  |  Options Trading Basics
Options Delta, Probability, and Other Risk Analytics November 30, 2023 3:40 PM   |  

Learn more about how options delta calculations and the options probability ITM (in the money) feature can help gauge the risk in an options position.

5 min read  |  Options Trading Basics
Vertical Options Spreads: Calculate Risk and Potential Profit October 31, 2023 1:16 PM   |  

When trading vertical options spreads, it's relatively simple to calculate maximum risk and profit potential. Here's how to assess these risk parameters.

3 min read  |  Options Trading Basics
TTM Squeeze Indicator: Technical Signals for Option Traders August 15, 2023 2:51 PM   |  

The TTM Squeeze indicator can help forecast market trends with signals. Learn how to recognize when a consolidating market is ready to shift into a new trend.

2 min read  |  thinkorswim Platform
Body and Wings: Introduction to the Butterfly Options Spread Strategy August 10, 2023 1:12 PM   |  

Learn more about the concept of butterfly options spreads, how they are different from iron condors, and an explanation of a butterfly options strategy.

5 min read  |  Advanced Options Strategies
Market Doldrums? Five Options Strategies for Low-Volatility Environments July 27, 2023 10:00 AM   |  

Explore five options strategies designed for low-volatility markets, including two bullish, two bearish, and one neutral, to help traders adapt their strategy.

5 min read  |  Advanced Options Strategies
Partner Up: How Pairs Trading Strategies Work with Market Relationships and Correlations June 15, 2023 11:07 AM   |  

Pairs trading can be risky without a proper understanding of the financial markets. Learn how to apply a pairs trading strategy effectively in this guide.

8 min read  |  Advanced Options Strategies
Credit vs. Debit Spreads: Let Volatility Guide You April 6, 2023 12:43 PM   |  

Understanding the difference between a debit spread versus a credit spread option can help you decide which one to use in a vertical spread strategy.

5 min read  |  thinkMoney Magazine
The Dos and Don'ts of Trading Options in an IRA November 10, 2022 10:26 AM   |  

Options trading in your IRA? Read more here about how these options trading strategies can potentially open up some possibilities you never thought existed.

5 min read  |  thinkMoney Magazine
Iron Condor Strategies: A Way to Spread Your Options Trading Wings April 14, 2022 11:30 AM   |  

Vertical spreads are fairly versatile when taking a directional stance. But what if you're stuck in a range-bound market? Learn about iron condor strategies.

3 min read  |  Advanced Options Strategies
Spread Trading Strategies: Different Strokes for Different Folks March 29, 2022 12:30 PM   |  

What is a spread trade? It depends on the products you trade. For a stock trader, it could be a pairs trade, and for an option trader, there are plenty of ways to put on a spread trade.

5 min read  |  Advanced Options Strategies
Risk Management: The Un-Fun, Must-Know Part of Trading January 10, 2022 10:15 AM   |  

Your risk-management strategy could decide whether you survive the next market turn. If you don’t have a trading plan in place, here are some ideas to help you get started.

5 min read  |  thinkMoney Magazine
Twin Tops: How and When to Set Up a Double Calendar January 10, 2022 10:15 AM   |  

Looking to get long volatility with a theta kicker using options? Consider a calendar spread. But if you also want to spread your risk across the price range of a stock, you might scale the twin peaks of a double calendar.

5 min read  |  thinkMoney Magazine
To Leg or Not to Leg: When Does It Make Sense? January 10, 2022 10:15 AM   |  

If you’re thinking of legging in to options spread strategies, know the pros and cons before diving in.

2 min read  |  thinkMoney Magazine
Big Stock Trading with a Parachute September 27, 2021 10:15 AM   |  

When stock prices keep going up, at some point they tend to fall. But you don’t know when. If you’re trading stocks that have gone up in price, you might want to consider options strategies such as time strangles, back/ratio spreads, and rolling collars as a potential protective measure.

6 min read  |  thinkMoney Magazine
Portfolio Diversification Redux: Think Like a Trader September 27, 2021 10:15 AM   |  

Diversification isn’t just about stocks, bonds, and cash. When hedging risk for an options portfolio, think price, time, and volatility.

5 min read  |  thinkMoney Magazine
Ask the Coach: What Are the Odds? September 27, 2021 10:15 AM   |  

When trading options, it can be helpful to assess the probabilities before making a decision to enter a trade.

5 min read  |  thinkMoney Magazine
Trading Against the Trend: Channeling Your Inner Contrarian August 12, 2021 10:15 AM   |  

When a trend is bullish or bearish, a reversal may be near. There may be no way of identifying the end of a trend, but you may be able to analyze the crowd’s behavior by looking at charts.

2 min read  |  Technical Analysis
Level Up Your Options Knowledge (To Synthetics and Beyond) June 28, 2021 10:30 AM   |  

Synthetics are the building blocks of the options trading world. Consider getting to know them, because you might be able to incorporate them as part of an overall options trading strategy.

5 min read  |  thinkMoney Magazine
Think Ahead by Looking Back: Using the thinkBack™ Tool for Backtesting Options Strategies May 31, 2021 10:15 AM   |  

The thinkBack™ tool in thinkorswim® can help backtest options strategies. Compare strategies, run entry and exit scenarios, and become a more informed option trader.

4 min read  |  thinkorswim Platform
Torn Between Options Strategies? Let Return on Capital Help You Decide May 20, 2021 10:15 AM   |  

Trying to decide which options strategy, strike price, or expiration date to trade? If capital efficiency is one of your criteria, consider return on capital (ROC).

5 min read  |  Advanced Options Strategies
How to Exit a Trade (Without Losing Your Mind) April 5, 2021 10:30 AM   |  

The next time you find yourself in a winning trade and think you can squeeze a little more, consider a few strategies to reduce your risks without giving up on more.

6 min read  |  thinkMoney Magazine
Vertical Spreads: Lower Margin Requirement Hurdle to Target Capital Efficiency March 1, 2021 10:30 AM   |  

Have a single-leg option? Consider using a vertical spread to turn it into a defined-risk spread to lower the margin requirements and free up capital at the same time.

4 min read  |  Advanced Options Strategies
The Short and Long of It: Your Top Questions on Short-Selling Answered February 8, 2021 2:01 PM   |  

Short selling, short interest, naked short selling are among terms some investors had scarcely paid attention to. But a flurry of apparent short squeezes in 2021 called attention to shorting. Here are some of the top questions answered.

6 min read  |  Margin
Options Exit Strategies: Get Out or Roll On? February 2, 2021 11:30 AM   |  

Three options strategies on how to exit a winning or losing trade: long options, vertical spreads, and calendar spreads.

5 min read  |  Advanced Options Strategies
In Defiance of Gravity: What’s a Short Squeeze and Why Do They Happen? January 29, 2021 12:59 PM   |  

When a stock suddenly enters a hyperbolic rally without clear fundamental reasons, it could be a classic short squeeze. And when it involves options, a so-called 'gamma squeeze' can exacerbate the moves—up and down.

5 min read  |  Economic Trends
What's Shakin'? Volatility, That's What. September 28, 2020 10:30 AM   |  

Traders tend to equate high volatility with fear. But volatility can also mean possible trading opportunities. So, instead of avoiding high volatility, learn to use it in your options trading.

5 min read  |  thinkMoney Magazine
Credit Spreads vs. Debit Spreads: Let Volatility Decide September 25, 2020 10:30 AM   |  

When deciding between trading credit spreads or debit spreads, it can be helpful to align the options strike prices and expirations with the level and direction of implied volatility.

2 min read  |  Advanced Options Strategies
New Options for Liquid Trading: Introducing Micro E-mini Options on Futures August 26, 2020 10:30 AM   |  

With Micro E-mini options on futures, option traders can participate in the futures market with less capital and with streamlined risk management.

5 min read  |  Options Trading Basics
To Hold or Fold that Options Position: 3 Questions You Should Ask Yourself June 30, 2020 10:30 AM   |  

When you make an options trade, you’re not typically locked into it until expiration. You can place an order to close it out most of the time. Here are three things to ask yourself when considering an options exit.

5 min read  |  Options Trading Basics
Republicrat or Democan? How to Manage an Election Trade June 29, 2020 9:30 AM   |  

The stock markets care about who wins the 2020 U.S. presidential elections. Stock traders look for potential trading opportunities regardless of who wins the elections. Look for clues within each of the party lines so you can be better prepared to face the election results.

5 min read  |  thinkMoney Magazine
Ask the Coach: Vertical Debit or Credit Spread? Surprise! It's the Same Options Trade (Sort Of) June 29, 2020 9:30 AM   |  

Some vertical spreads have the same looking risk profile. There's a reason why that may be the case. Here's an example of a vertical debit and credit spread options trade.

5 min read  |  thinkMoney Magazine
Looking for a New Asset Class to Trade? The Case for Options on Currency Futures May 29, 2020 3:10 PM   |  

The global foreign exchange (FX) market is deep, liquid, and traded virtually around the clock. If you’re an option trader in search of a new asset class to trade, consider options on currency futures.

5 min read  |  Futures
thinkorswim Web: Streamlined Stock, Futures, Forex, and Options Trading May 28, 2020 10:52 AM   |  

thinkorswim Web is the TD Ameritrade streamlined, web-based options trading platform that lets you trade wherever you have an internet connection.

5 min read  |  Web Platform
Beyond Margin Basics: Ways Investors & Traders May Apply Margin August 22, 2019 11:38 AM   |  

Once you’ve mastered the basics of margin trading, you might want to learn how different trader and investor types use it. It can depend on your objectives, risk tolerance, and the products you trade.

8 min read  |  Margin
How Big Should My Options Trade Be? June 30, 2019 11:48 AM   |  

There are different ways to determine the size of your options trade. You may want to risk a certain percentage per trade or you may consider total portfolio risk. When you are ready to increase your risk tolerance, you could increase the number of trades, the amount you put into each trade, or the risk level for each trade.

5 min read  |  thinkMoney Magazine
Pairs Trading: The Third Dimension of Trading June 30, 2019 11:47 AM   |  

Pairs trading is a trading strategy that involves two stocks in the same sector. There are different ways to create a pairs trade, whether you are pairing two stocks, stocks and ETFs, stocks and options, or options and options.

5 min read  |  thinkMoney Magazine
Vega: It's Not the Number You're Thinking June 30, 2019 11:45 AM   |  

Vega can show you how much the dollar value of an option changes for every one percentage point change in volatility. But traders often confuse vega with volatility. Knowing the right way to use vega can help you come up with an options trading strategy.

6 min read  |  thinkMoney Magazine
Looking for a Potential Edge? Options Stats, Pre-Sliced and Diced on thinkorswim May 29, 2019 4:00 AM   |  

Explore options statistics on thinkorswim—implied & historical vol and percentiles, the Sizzle Index, and the put/call ratio. Learn how options stats can help traders and investors make more informed decisions.

5 min read  |  Options Trading Basics
Going Vertical: Using the Risk Profile Tool for Complex Options Spreads March 28, 2019 4:00 AM   |  

Once you’ve learned to use the Risk Profile tool on the thinkorswim® platform for single-leg options, you may wish to use it for more complex trades.

3 min read  |  Advanced Options Strategies
Return On Capital: The Great Decider October 1, 2018 3:00 AM   |  

Return on capital when trading options is different than return on capital when managing investments. Here’s what return on capital means to an options trader.

3 min read  |  thinkMoney Magazine
Vertical Credit Spreads: Your High-Probability Trade? September 7, 2018 6:00 AM   |  

Selling vertical credit spreads, and how it may be a high-probability strategy.

5 min read  |  Advanced Options Strategies
Vertical Spreads vs. Single-Leg Options: Comparing Risk & Reward June 4, 2018 4:00 AM   |  

Learn how vertical spreads can be a more cost-effective way to speculate on direction, versus buying single legged options like a long call or long put.

5 min read  |  Options Trading Basics
Going on Strike: Consider Widths when Buying Vertical Spreads August 3, 2017 12:00 AM   |  

If you have a directional view on a stock price, buying a vertical spread might be for you. But deciding on strikes and strike widths requires some thought.

3 min read  |  Advanced Options Strategies
Unbalanced Butterfly: Tilting the Odds April 17, 2017 12:00 AM   |  

How to tweak a butterfly when you have strong directional bias, time to expiration is short and you want to squeeze as much as you can out of your position.

8 min read  |  Advanced Options Strategies
Ready to Go Vertical? Options Spreads with Versatility January 25, 2017 11:00 PM   |  

Ready for a more advanced options trading strategy? We explain vertical spreads (credit and debit).

4 min read  |  Options Trading Basics
Long Tooth, Busted Jaw: Three Signs a Trend May End December 31, 2015 11:00 PM   |  

When will a stock trend end? There are a few stock chart indicators that make spotting trend reversal warning signs a little easier.

6 min read  |  Charting
Rethink Options: Aim for Income by Embracing Market Inaction November 23, 2015 7:00 PM   |  

Income-focused option trades succeed when the market doesn’t move that much. Learn how to recognize income opportunity.

4 min read  |  Options Trading Basics
Option Strategy Throw Down: Selling Strangles vs Iron Condors October 7, 2015 8:01 PM   |  

Volatility’s tendency to level out after a spike can present strategy opportunities, especially selling strategies found with strangles and iron condors.

5 min read  |  Advanced Options Strategies
Taking a Dive Into the Not-So-Deep End: Defined-Risk Trading October 1, 2015 7:32 PM   |  

Maximizing the risk/reward of a defined-risk trade—how to increase the risk-to-reward profile in short vertical spreads.

5 min read  |  Advanced Options Strategies
Market Grudge Match: Enter a Trade Using Volatility or Price? October 1, 2015 6:03 PM   |  

Use volatility to pick an options strategy to speculate on a given direction, rather than to replace fundamental analysis and charts to determine potential.

7 min read  |  Options Trading Basics
Fine-Tuning: Option Adjustments for Losing Trades September 16, 2015 8:01 PM   |  

Choose adjustments for losing trades that are true to your market outlook, risk tolerance, and trading style.

3 min read  |  Options Trading Basics
How to Use Chart Divergences as Leading Indicators September 7, 2015 8:00 PM   |  

Learn to recognize divergences between chart indicators and price action. It’s the first step toward confirming trends.

5 min read  |  Charting
Trading is (Not) Gambling: Why the Naysayers are Wrong April 27, 2015 10:05 PM   |  

The principles of successful trading are also rooted in the professional side of the card table rather than pure luck. The trick isn’t just knowing when to hold 'em, or fold 'em, but why.

8 min read  |  Options Trading Basics
Out-of-the-Money Spreads: Potentially Expand Profit Options January 12, 2014 9:31 PM   |  

For options speculators with less of an appetite for risk, these vertical spreads offer up a savory solution.

5 min read  |  Advanced Options Strategies
Did You Really Go There? High-Probability Options Trading June 5, 2013 3:33 PM   |  

Anything can happen in one trade. But over a large number of options trades, high probabilities are what matter most.

4 min read  |  Advanced Options Strategies
Options on Futures: Familiar Ground … Sort Of October 1, 2012 12:31 PM   |  

Yes, you can have a derivative on a derivative. But don’t let that scare you. Options on futures may be easier to understand than you think.

13 min read  |  Futures
To Leg or Not to Leg into an Options Spread? January 1, 2012 11:04 AM   |  

Because an options spread has more than one "leg," does it make sense to enter one leg at a time if you can get a better price on a different exchange? Maybe.

3 min read  |  Advanced Options Strategies

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