The bull call debit spread offers one of two outcomes: limited profit or limited loss. It sets up as a debit in every case. Outcomes depend on the bid-ask spread and also on selection of strikes. Because the outcomes vary with these considerations, profit, loss and breakeven will vary as well. This consists of a… [READ MORE]

How do you calculate probability? One mathematical paradox is that a commonly used method is inaccurate. The additive method is used frequently. In this method, you calculate the likelihood of one outcome. For example, in the roll of one die, there is a one in six chance of any one number coming up, right? Consider… [READ MORE]

Many traders start out with a sensible plan, only to abandon it because of the way the markets move. This abandonment of a smart plan may lead to potentially large net losses. In entering a trade, it is sensible to set two goals: the point where profits will be taken, and the bail-out point where… [READ MORE]