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SK Options Trading Explains Bullish Vertical Put Credit Spreads

A Bull Calendar Call Spread is a strategy used by option traders that involves buying long term out of the money calls, whilst at the same time, writing (selling) an equal number of near month calls of the same security with the same strike price. Therefore the trader is speculating that the short term written options remain out of the money and expire worthless, effectively discounting their cost of holding the longer term options.

This options strategy would be used if the trader expected the underlying to rise gradually over a set amount of time.

The risk of this strategy is limited to the amount of premium paid for the long term calls, minus the premium received from writing the short term calls. The risk for this trade is if the underlying declines and does not return up before the expiration of the long term call.

Although the downside risk on this trade is limited, the sky is the limit for profits.

Overall this strategy is similar to buying a call option however at a potentially discounted cost.

For example, the bull calendar call spread options strategy was used by SK OptionTrader on the 28th of July 2011.This was achieved by buying the GLD Jan-12/Oct-11 $170 Calendar Call Spread for a net debit of $2.37. This involved buying GLD Jan-12 $170 Calls and selling GLD Oct-11 $170 Calls. SK OptionTrader signalled the trade with the view that gold would go to $1800, from about $1625 on the 28th July. The position was closed just 14 days later, with profits of 43.46%. 

Being able to use this and many other options strategies effectively increases ones versatility in the market. Also using these strategies allow traders to place trades that more accurately represent their market views, which when correct, can lead to much higher profits. 

Currently the SK OptionTrader model portfolio is up 407.38%, which means a $10000 portfolio invested in accordance with SK OptionTrader signals would now be worth $50,738.14. On average a position gains 42.43% in 45.85 days, which provides an annualized return of 113.83%. So now is the perfect time to open a subscription with SK OptionTrader and begin increasing the profitability of your options trading portfolio.

For those subscribers who are too busy to trade their own accounts we are now able to offer Autotrading programs with our SK OptionTrader service. One can sign up for autotrading with Global AutoTrading or eOption.


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