What is the possibility of spreading?

is a means of investing in the stock market. It provides an opportunity to the investor, but not the obligation to buy shares for an option with an option within a given time frame. Investments in options can check shares without ownership of shares. The possibility of spreading is a means to reduce the risk associated with investment in two options that are similar, but differ in a certain key aspect. Each option can compensate for potential losses of another.

One option provides profits if the market moves in the expected direction. The market price of the underlying shares must rise during the call option to gain value and must go down for the PUT to obtain value. When investors buy two possibilities of compensation, movements in the basic value of shares will bring profits if they are positive, neutral or slightly negative. Bullial strategy means that the investor believes that the value of the shares will increase, while the bear strategy means the opposite.

Use of spreading as a consistent investmentThe strategy offers several advantages. There are lower trade costs: The option sold compensates for the cost of purchasing. The overall risk of risk. Bull shops decrease the breakpoint. The main disadvantage is that the profit potential is limited and the costs of commissions can be higher.

The possibility of spreading separated by the difference in the prices of strikes is a vertical range. The bull span includes the purchase of a lower strike call and selling the same number of contracts with a higher strike, all at the same date of expiry. This possibility of spreading works well as a long -term strategy, while the possibilities will expire for six or more months in the future. In the Bull Space, the lower strike is purchased together with the sale of a higher strike. Short -term income strategy is often based on bull span.

Calendar Spread concerns the possibilities of buying a variety of expiration data. If it is generally assumed that shares are moving in isDental days, possibilities of buying a calendar spread is one of the ways to reduce the long -term risk. Chicken strangle is a span in which the call and PUT are purchased at several strikes from the current value of the shares. This technique often works well for highly volatile supplies. One option goes to zero while the other is sold.

The range of the range came to cover many other risk reduction strategies. On the futures markets, commodities can be purchased and sold at different stages of processing. The possibility of disagreement of cracks concerns the difference between oil and refined products. The Crush Spreed option compares the value between soy futures and soy oil and food. Processors can reduce the risk of deviations of production costs and investors can potentially share profit margins by trading in these assets.