Forecasting Market Direction With Put/Call Ratios
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Lines of credit give the potential borrower the right — but not the obligation — to borrow within a specified time period.
Maximum gain is reached for the bull call spread options strategy when the stock price move above the higher strike price of the two calls and it is equal to the difference between the strike price of the two call options minus the initial debit taken to enter the position.
There are two types of options: call options and put options. A buyer of a call option has the right to buy the underlying asset for a certain price. The buyer of a put option has the right to sell the underlying asset for a certain price.
For example, assume an investor owns one put option on hypothetical stock TAZR with a strike price of $25 expiring in one month. Therefore, the investor has the right to sell 100 shares of TAZR at a price of $25 until the expiration date next month, which is usually the third Friday of the month. If shares of TAZR fall to $15 and the investor exercises the option, the investor could purchase 100 shares of TAZR for $15 in the market and sell the shares to the option's writer for $25 each. Consequently, the investor would make $1,000 (100 x ($25-$15)) on the put option. Note that the maximum amount of potential profit in this example ignores the premium paid to obtain the put option.
Once the average investor has reached a comfort level trading stocks, then he should begin learning about put and call options and how to trade them. Then, once he understands the basics and how to trade them successfully, then he should implement them in his regular trading and portfolio management strategy and watch his profits increase.
S&P 500 (SPX), CBOE Market Volatility Index (VIX), 21-Day Equity Only Put Call Ratio (PC21), and Weighted 21-Day Equity Only Put Call Ratio (PC21 w) charts updated each Friday.
A trader who expects a stock's price to increase can buy a call option to purchase the stock at a fixed price ("strike price") at a later date, rather than ...
An introduction to using spreads, including an overview of the four Vertical Spreads: Bull Call Spread, Bear Put Spread, Bear Call Spread and Bull Put Spread.