The first and most basic of the neutral option strategies is the butterfly spread, which is a combination of two vertical spreads.  Therefore, it’s important to review vertical spreads before attempting to understand the butterfly strategy.  A butterfly spread is primarily used to trade neutral or...

In earlier posts, we covered directional trading strategies that consist of option vertical spreads.  A vertical spread can be a bullish (long call spread) or bearish trade (long put spread), but our trading toolbox still lacks strategies for trading neutral markets.  A neutral market is the opposite of a...

A bear put spread is a fundamental bearish spread in options trading, composed of two put options with different strike prices that expire in the same month, where a “HIGHER” put strike is purchased and a “LOWER” put strike is sold, simultaneously.  Think of the basic definition of...

A bull put spread functions in the same manner as a bull call spread, except that put options are used rather than calls options to initiate the trade.  In a bull put spread, a “LOWER” put strike is purchased and a “HIGHER” put strike is sold, simultaneously. The risk profile of a...

A BEAR CALL SPREAD (short call spread) is a fundamental bearish spread in options trading, composed of two call options with different strike prices that expire in the same month, where a HIGHER call strike is purchased and a LOWER call strike is sold, simultaneously.  By combining a long call option...