how to do riskless spread trades
TRANSCRIPT
![Page 1: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/1.jpg)
How to Do RISKLESS Spread Trades
![Page 2: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/2.jpg)
Spread Trades can capture a lot of premium…
![Page 3: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/3.jpg)
The BAD news: they can also cost your shirt.
![Page 4: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/4.jpg)
Example:
the “BEAR CALL
SPREAD”
![Page 5: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/5.jpg)
The Bear Call Spread is called a “credit” spread…
![Page 6: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/6.jpg)
…because you get paid to do it.
SELL TO OPEN $77.50: $2.10 BUY TO OPEN $80.00: -$1.10 TOTAL CREDIT: +$1.00
![Page 7: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/7.jpg)
![Page 8: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/8.jpg)
…you keep the $1.00 (per share)
capturedfrom the spread.
Safe zone: you keep the $100 credit
![Page 9: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/9.jpg)
Maximum loss: $150
If your stock goes UP, you get
CLOBBERED!
BUT..!
![Page 10: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/10.jpg)
a spread can
also bite you back!
DANGER, WILL ROBINSON!
![Page 11: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/11.jpg)
The MARTINGALE Strikes AGAIN!
![Page 12: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/12.jpg)
But what
if YOU had a secret
weapon?
![Page 13: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/13.jpg)
An Ace in Your Sleeve?
![Page 14: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/14.jpg)
..but NEVER worry about it BACKFIRING?
What if there was a way to grab the premium of the spread…
![Page 15: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/15.jpg)
Introducing a REVOLUTIONARYidea…“NESTED” Spread Trades!
![Page 16: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/16.jpg)
…a spread trade nested within another trade…
![Page 17: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/17.jpg)
A strategy that generates premiumin the spread trade…
…but NOT risk.
![Page 18: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/18.jpg)
Wanna see how?
![Page 19: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/19.jpg)
Let’s look at the “Context” Tradeof our nested spread,
A Married Put
![Page 20: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/20.jpg)
Your stock is protected by a “put” option…
GILD stock 100 shares $75.70November $77.50 put +$ 3.80TOTAL INVESTMENT $79.50Protected by Put: -$77.50Total Amount AT RISK $ 2.00(per share; risk of 100 shares is $200)
![Page 21: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/21.jpg)
Now there’s no limit to how high your“MARRIED PUT”
investment may go,
![Page 22: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/22.jpg)
…but there is a hard stop, in case the
play starts losing.
![Page 23: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/23.jpg)
GILD stock 100 shares $75.70November $77.50 put +$ 3.80TOTAL INVESTMENT $79.50
That’s $7,950 invested with unlimited upside potential, but a limited amount of risk
In this case the total amount AT RISK is $200, or 2.5%.
![Page 24: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/24.jpg)
Now let’s look at that Bear Call Spread
again:
SELL TO OPEN $77.50: $2.10 BUY TO OPEN $80.00: -$1.10 TOTAL CREDIT: +$1.00
![Page 25: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/25.jpg)
It gives you $100 at the beginning, yes… but has $250 risk!
![Page 26: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/26.jpg)
That means youcan lose the $100,PLUS an additional$150/contract…
![Page 27: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/27.jpg)
PAY ATTENTION NOW…
![Page 28: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/28.jpg)
You might THINK that the $200
(married put risk) +
$150 (bear call risk) =
$350 total capital risk...
![Page 29: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/29.jpg)
But in fact, The total
capital risk is only
…$100!
Check the next slide for
the COMBINED position…
![Page 30: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/30.jpg)
Combined Risk/Reward depiction courtesy of PowerOptions(…FREE two week trial! )
![Page 31: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/31.jpg)
The $100 income received for doing a Bear Call Spread… takes the risk of the Married Put down… from original $200 to just $100. Just look at the red water getting shallower…
![Page 32: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/32.jpg)
Meanwhile, the Bear Call Spread has no capital risk of its own. Risk in the spread would come if we did not own the stock…but we do.
$77.5/$80 bear call spread has no inherent capital risk
![Page 33: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/33.jpg)
$200 + $150 = $100 total risk? HUH?(Yup.You actually end up with less
total risk by doing both plays!)
![Page 34: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/34.jpg)
TA-DAAAAA! A RISKLESS Bear Call Spread!
![Page 35: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/35.jpg)
That’s not all.Let’s look closer:
![Page 36: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/36.jpg)
IF your stock goes up,
![Page 37: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/37.jpg)
…well, we kinda LIKE that when it’s our stock. There’s unlimited upside potential!
![Page 38: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/38.jpg)
The net position has $100 risk, but unlimited potential. But
that’s not all. It MAY possible to eliminate ALL risk.
![Page 39: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/39.jpg)
Did You say ELIMINATE RISK?
Let’s see how THAT’S done…
![Page 40: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/40.jpg)
The Put option protecting this stock expires in November…
![Page 41: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/41.jpg)
But the Bear Call Spread finishes in September.
![Page 42: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/42.jpg)
If your stock stays sideways or goes down…
![Page 43: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/43.jpg)
You get to keep that $100 at September expiry..!
![Page 44: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/44.jpg)
So what happens if we do keep the $100 premium?
![Page 45: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/45.jpg)
Why, we get to do it again of course!
![Page 46: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/46.jpg)
If you collect another $100… …you’ll cancel all the risk.
• Aug 31: Married Put begins with $200 risk– Also Aug 31“Nested Spread” captures $100... $100 risk left
• Sep 30: Bear Call Spread Expires– “bank” the first Bear Call Spread, do another Bear Call Spread– Capture a second $100!– $200 total captured offsets the $200 AT RISK…– NO risk left!
![Page 47: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/47.jpg)
Whether the stock goes up, down, OR sideways… we WIN!
No RED Water!!
![Page 48: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/48.jpg)
This is called “Bulletproofing”
![Page 49: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/49.jpg)
NAY-SAYER ALERT!!This SlideShare was uploaded on Sept 16, 2016 two weeks in advance of the Sept 30, 2016 expiry of the Bear Call Spread.
Whether the goes down, up, or sideways, the Bear Call Spread itself poses no capital risk.
Watch for the followup SlideShare to see how this real example is managed!
![Page 50: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/50.jpg)
FURTHER NAY-SAYER ALERT!!The original blog post was entered on August 31 and there are over eighty comments at the time of this writing.
The riskless Bear Call Spread featured in the blog post is commonplace. We have six others.
Watch for the followup SlideShare to see how this real example is managed!
![Page 51: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/51.jpg)
Imagine never worrying about a Bear Call Spread…
HA! Your “Bear Style”is no match for my kung fu!
![Page 52: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/52.jpg)
…ever coming back to “bite you”!!
You’ve learned to eliminate risk in the Bear Call Spread.
![Page 53: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/53.jpg)
The best part? It’s not just the Bear Call Spread.
There are SEVEN riskless spreads.
There’s more than ONE way to peel an apple.
Get this two hour video on SEVEN different risklessspread trades “Stop Losing at Spread Trades Forever”!
![Page 54: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/54.jpg)
This quick slideshow is just the start of “RadioActive”
riskless spread trading…
![Page 55: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/55.jpg)
To learn more about Riskless Spread Trading (and Bulletproofing!)…
![Page 56: How to do Riskless Spread Trades](https://reader035.vdocument.in/reader035/viewer/2022062400/58a71a311a28ab02678b61f3/html5/thumbnails/56.jpg)
…check out these articles on the RadioActive Trading Blog!
You can Click these Links!• Can You REALLY Do a RISKLESS Spread Trade?• WHAT on Earth is a Nested Spread Trade?• The Strange Secret of Riskless Spread Trading• The RISKLESS Spread Trade that Pays You TWICE
OR! Get this two hour video on SEVEN different risklessspread trades “Stop Losing at Spread Trades Forever”!