Using options to focus more on either uptrend or downtrend is an effective method for augmenting the swing itself. The strategy assumes that you have an opinion about the prevailing direction of movement in the underlying, and that momentum confirms your opinion. So as a starting point, you can coordinate a weighting decision by checking… [READ MORE]

Covered call writers can avoid exercise by closing the call and replacing it with a later-expiring one. But some pitfalls may also occur along the way. The forward roll works because a later-expiring contract at the same strike is always worth more, due to higher time value. So you can always change out the short… [READ MORE]

  The short “gut spread” combines the sale of an in-the-money call and an in-the-money put. They have the same underlying and expiration date. In comparison, a normal spread would combine out-of-the-money positions. This makes the short gut spread a high-risk strategy; but if time decay is used advantageously and the underlying price does not… [READ MORE]

The long “gut spread” is a strategy involving the purchase of an in-the-money call and an in-the-money put. They have the same underlying and expiration date. In comparison, a normal spread would combine out-of-the-money positions. The gut spread is more expensive because both options are in the money. However, it combines limited risk with unlimited… [READ MORE]