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Basics of Spreading: Time Spreads

Continuing Education Credit: 1 hour*
*Available for fee-based courses only, please send us an email for more information.

Course Expiration: Course access expires 12 weeks from date of registration

Cost: Free



Course Overview:

Third in the series, this module presents detailed explanations and examples of Time Spreads.

The following spreads are covered in this module:



  • Long Call Time Spread
    The long call time spread is a spread made up of call options on the same underlying stock (or index). It’s constructed by purchasing a call with a farther-term expiration and at the same time selling (writing) a call with a nearer-term expiration but with the same strike price.

  • Long Put Time Spread
    The long put time spread is a spread made up of put options on the same underlying stock (or index). It’s constructed by purchasing a put with a farther-term expiration and at the same time selling (writing) a put with a nearer-term expiration but with the same strike price.

Each Spread discussion includes an analysis of:

  • General Nature & Characteristics
  • Debit vs. credit
  • Motivation for Spreading
  • Risk vs. Reward
    - Maximum Profit at Near-Term Expiration
    - Maximum Loss
    - Break Even Points at Near-Term Expiration
    - Partial Profit or Loss
  • Profit & Loss Before Expiration
  • Effect of Volatility
  • Effect of Time Decay
  • Assignment Risk

 

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