1. Your Questions About Options Trading 101
Chris asks…
When should i buy option vertical spread?
When i buy either put vertical spread, do i make money by hoping the stock will go down? Or do
i want the stock to trade within my put spread range? For example, i buy XYZ $100 put option
June for $1.00 and sell XYZ put $90 option at $0.50 when the stock is trading at $101. Should i
hope that the stock stay between $90-$100 or should i hope for it to drop below $90.
Steve Winston answers:
First, you should not trade options at all until you understand the risks and rewards associated
with options, as well as the ways to control the risks. Second, I am assuming you did not ratio
the spread. IOW, I am assuming the number of short options equals the number of long options.
As for when you would want to buy a vertical spread, it would be when
(1) you are either bullish or bearish on the underlying and
(2) you believe implied volatility (compared to the volatility the underlying will experience prior to
expiration) is either too high or too low. If you do not have a forecast for implied volatility you
should trade the underlying instead of options on the underlying,
If you are bullish, you want to buy a call vertical spread.
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2. If you are bearish, you want to buy a put vertical spread.
If you believe implied volatility (IV) is too high, you want to sell the option with a strike closer to
the underlying price and buy the option with a strike further away from the underlying price.
If you believe IV is too low, you want to sell the option with a strike further away from the
underlying price and buy the option with the strike closer to the underlying price.
If the underlying is a stock use the current price of the stock increased by the risk-free interest
rate until expiry less any dividends expected prior to expiry as the underlying price.
You don't make any money by hoping anything.
All else being equal, a long put vertical spread will increase in value if the underlying decreases
in value.
All else being equal, a long call vertical spread will increase in value if the underlying increases
in value.
At expiration, a long put vertical spread will provide the maximum return in the underlying is
below the lower strike price, have a smaller return if the underlying is between the two strike
prices, and be worthless if the underlying is above the higher strike price.
At expiration, a long call vertical spread will provide the maximum return in the underlying is
above the higher strike price, have a smaller return if the underlying is between the two strike
prices, and be worthless if the underlying is below the lower strike price.
Assuming you want the maximum return you do not want the underlying trading between the
two strikes at expiration.
Assuming you want to make as much as possible, you want it to drop below $90, but you would
rather have it between $90-$100 than above $100.
-----------------------------
I strongly suggest you read at least one good book about options before trading them.
2 / 15
3. Susan asks…
Trading Ladanian Tomlinson...?
Yes, I know he's good... Yes, I know he set the record last year... But that was last year... I'm
seeing what the people in my league are willing to give me for him, as I feel that, while he will be
a top 5 back, there is no guarantee that he will be number
1...
So I figured it wouldn't hurt to test the waters and see what he's worth...
In that light, here are the more serious offers...
Offer 1... LT for Rudi Johnston and Chad Johnston...
---OR---
Offer 2...
Tom Brady
Steve Smith
Donald Driver
Edgerrin James
for
Marc Bulger
Lee Evans
Reggie Brown
LaDainian Tomlinson
I'm inclined to ignore the latter offer, as it would downgrade me at RB more than I'd like... But
the first offer really has me thinking... Yes, Rudi won't be quite as good as LT, but picking up
Chad is tempting... I'm essentially getting the number 9th and 12th picks (10 team league) for
the number 1 pick...
So, the question is, am I out of my mind??? Should I stay with LT??? Should I try to get a better
3 / 15
4. deal while his value is insanely high???
Here is my team as it stands now, keep in mind that it's only a 10 team league and some of the
people in it are complete idiots who drafted extremely badly...
Starting Roster is...QB,WR,WR,WR,RB,RB,TE,K,DEF and 6 Bench spots...
Round Overall Pick
1. (1) LaDainian Tomlinson
2. (20) Willis McGahee
3. (21) Marvin Harrison
4. (40) Lee Evans
5. (41) Marc Bulger
6. (60) Reggie Brown
7. (61) Todd Heap
8. (80) Terry Glenn
9. (81) Deuce McAllister
10. (100) Matt Hasselbeck
11. (101) Chris Cooley
12. (120) Dallas
13. (121) Jason Elam
14. (140) Matt Stover
15. (141) Ronald Curry
The 2 teams who really want LT...
Option 1 team...
1. (9) Rudi Johnson
2. (12) Chad Johnson
3. (29) Adrian Peterson
4. (32) Randy Moss
5. (49) Heath Miller
6. (52) Baltimore
7. (69) Philip Rivers
8. (72) Nate Kaeding
9. (89) Vincent Jackson
10. (92) Tony Romo
11. (109) Minnesota
12. (112) Benjamin Watson
13. (129) Chester Taylor
14. (132) Fred Taylor
15. (149) Derrick Mason
This guy wants LT, and I'd like to have Chad Johnson, but my WR core is pretty solid... He's
worried about Peterson, and wants LT to pick up the slack... I suspect this offer won't be on the
table long after he realizes that Peterson is going to have a decent year...
4 / 15
5. Option 2 team...
1. (7) Steve Smith
2. (14) Tom Brady
3. (27) Edgerrin James
4. (34) Donald Driver
5. (47) Maurice Jones-Drew
6. (54) New England
7. (67) Bernard Berrian
8. (74) Kellen Winslow
9. (87) Robbie Gould
10. (94) Muhsin Muhammad
11. (107) Warrick Dunn
12. (114) Eli Manning
13. (127) Greg Olsen
14. (134) Jerry Porter
15. (147) San Francisco
Now this guy is desparate... By the time he looked to take a RB, the best on the board was
Edge... Maybe he thought that a decent back would fall to the 3rd round, but my dog would
have known better than to leave a RB till round 3...
Any thoughts??? Any trades that I should suggest??? Any I should take??? Or am I insane for
even considering dealing him, no matter what someone is willing to offer???
Steve Winston answers:
Those offers don't look good enough, as you have a very solid team compared to those two
teams you mentioned.
Rudi always has a dry spell, and ocho cinco is overrated.
If you want to get so much for LT, you should hold onto him, and kill your weak opponents with
his HUGE amount of points.
Best of luck!
5 / 15
6. Charles asks…
Is Obama's economic policies working, if so why and if not, why,
and what can he do to save the economy?
So apparently the stimulus isn't working, the multiplier effect didn't really take root as it should
have, recipients of the stimulus money seem to be saving their money instead of spending it so
that it could have a ripple effect across the economy, seems to me the MPS is at it's highest in
years.
The Health Care bill has had companies saving and hiring less because of future expenses.
Banks are already reluctant to lend money and now more regulation will be out there which will
make them even more reluctant to lend, which will force companies who rely on lines of credit to
cover expenses in the short term will very little monetary options, and could ultimately force
them out of business.
The only way he could save us, is to repeal his health care plan and create incentives like the
Health Care savings account, and allow interstate commerce of Health Care. Make these
insurance companies compete with each other.
No cap and trade bill, it's a job killer and anyone that took Econ 101, and 102 would know this.
Instead subsidize companies in the renewable energy sector, because this will eventually bring
increase technological advancement in the field and make it more cheaper than what we have
currently.
The financial reform bill should include freddie and fannie, and no new taxes, because in the
end the consumer will take the tab.
We could argue all day long about how the Prez's economic policies will affect the SRAS and
6 / 15
7. AD, but it's definitely not working.
Steve Winston answers:
It is not working for a few reasons.
1. Only about 1/2 has been spent. The "stimulus" package was designed to have about 50%
spent during the 2nd and 3rd quarters of 2010 and 2012. Not for job stimulus but for vote
stimulus.
2. Of the 1/2 that has been spent, it was spent mostly on enriching his friends in Chicago politics
and for ridiculous projects that create very few jobs.
3. Obama's ridiculous spending and ramming health care down our throats, along with his
insistence on the HORRIFIC Cap-n-trade has so many people so scare of what he will do next
and what we can expect from taxes in the next few years that they are tightening their belts so
tight that their butts are puckering.
What can he do?
1. CUT TAXES ACROSS THE BOARD AND PUT AN IMMEDIATE FREEZE ON SPENDING
2. Seal the border and aggressively enforce immigration laws, including HUGE fines for anyone
caught employing and/or housing illegals and immediately cut off 100% of entitlement to illegals.
3. IMMEDIATELY repeal the Health Care bill and promise to scrap cap-n-trade.
ADDED: The second guy with the mathematical name uses a campaign comparison as
evidence that Obama's idiotic policies are working?? WOW! Just because McCain was an idiot,
too, does not mean that the idea was sound. McCain was FAR TOO LIBERAL for most
republicans. That is part of why Obama won. Conservatives stayed home. Is it working? HELL
NO!
ADDED: I just love Sageands answer. I will just pick on the two most laughable.
>>>600,000 new private sector jobs....yeah, in districts that do not exist. This is the most
laughable claim they have made....and they have made several.
>>>Unemployment dropping...NOT! There are people dropping off of unemployment because
they have given up on looking, but from 10% to 9.5% is not a drop, and when reality is included,
unemployment is still rising.
7 / 15
8. Michael asks…
If The State Were To Create A Big New Neutral Politcal Party ....
Which Would Be The Best?
Here are some good options - please choose your favourite and comment:
A. randomly select 25 people every year (who in turn elect their party's leader, all gather to vote
on major decisions, and choose 10 to survive into the next year when a new 25 will join them) -
This one is closest to the idea of having a mini-referendum on every issue that goes to
legislature
B. Convene a party of distinguished experts with top school & uni marks and who have various
different economical/political/legal/related specialisms and hope that together they cazn give
great advice
C. allow each of the 24 most-commonly-held professions in society (+ a 25th one for 'the rest')
to each have a gathering in which they select one in a tournament of groups all people starting
as voters and candidates, in the end one spokesperson from each profession is elected and
these 25 together vote on the party's main decisions and they form a party,
D. similar to C but with businesses of employee number sizes 1-2, 3-10, 11-30, 31-100, 101+
each contributing three members and 10 NPO/NGOs/charities or similar also getting one seat
each
E. a similar outcome but with ethnicities .... the biggest ten ethnicities in the country each get
one seat, the biggest four each get a 2nd seat, and 'the rest' gets the 15th seat. Or, instead of
ethnicities, small political parties or church groups or trade unions or some sort of
representation of the consumers & the unemployed, ...
Or F. A variation of A in which age ranges and/or regions/provinces/counties of the country
8 / 15
9. each have a quota within the governing body of the party
by random I mean, in a lottery drawing .... the outcome aims to be to bring the party's views in
line with that of the general public
I hereby remove all mention of the word neutral - all I meant was that this new party would not
be governed by Putin & Bill Gates, like all the others are
Steve Winston answers:
Ummm..............retarded people party. Also known as the Dysfunctional Idiots.
Mark asks…
My car loan didnt go thru so i had to return the car?
About 9 days ago, i traded out my lease into another car for purchase. this pass friday the
dealership calls me an says i need 2 bring the car back, cuz my income wasnt high enuff for the
car/loan so i took the car back, but during that 9 days, they prolly called me 3 times asking bout
my income, cuz i hav 2 jobs, and they needed xtra verification on my secound job. So i asked if
everything was ok, cuz i kept gettin calls and he said it fine, its jus taking longer to get me
9 / 15
10. approved. ive never been thru this b4, so i jus figured ok. So.....in SC they dont do inspections, i
live in NC, i got an inspection done, oil change, and the tires wasnt really any gud, so i have a
set of rims i had put on, b/c i didnt want to keep riding around on bad tires (my set of tires were
waay better)..so getting all that done at the dealership, it cost me, bout $101.00 labor included.
So the day after i got all that done, thats wen they call 4 me 2 return the car, i said ok, and
asked 4 the General Manager to c if i can get reimbursed 4 wat i had 2 do with this car. Of
coarse im not getting 2 far, i did talke 2 him, but he seemed not helpful at all. The day i brought
the car bck i was suppose 2 talk with him, but i got there too late, and he was already gone
which was this pass Friday, so ive been callin, an it looks like imma hav a hard time get this
dealt with.
I believe i am entitled back the money i put in. I was told everything was going fine with my loan,
and i wasnt going to ride on bad tires, ride in a car without getting an oilchange if need be, an
not hav an inspection done to the car. My safety came first and that y i got these thing done. My
plans r 2, file a complaint thru the BBB, and contact my local news channel to also write a
complaint, and make phone calls 2 whomever can help me till i get this resolved.
What does every1 else think of this? Can sum1 give me other options of wat i can do and who
2 call?
Steve Winston answers:
Wow, look at all the spammers you attracted with this question!!!
10 / 15
12. Steve Winston answers:
Promo: Tonight I get my first title match here in YWWA. It will be a Triple Threat Match for the
Openweight Championship that will include the champion Psycho Dude 99, my tag team partner
Perfection At It's Best, and The Golden Falcon. I haven't seen you yet tonight PAIB but I will tell
you this. Give it all you got.. If we don't get aggressive tonight then we will never be successful
here in YWWA because in many occasions, your going to have to go up against people you
don't want to go up against. Do you want to be like those jerks that insults their opponents and
then back down from the fight? Do you want to satisfy the fans that we quickly attracted to the
side of perfection? Do you want Golden Perfection to reach legendary status? Well all these
questions have all but one solution. And that is by giving these fans the most amazing
Openweight Championship matches to ever exist here in YWWA. I am expecting you to give me
just as big as a fight as your going to give Psycho Dude. And let me address something to you
Psycho Dude. You call me whatever the hell you want.. Actions speak louder than words do and
I will show everyone why.You say that after Survivor Series your going to be holding three
championships? After Survivor Series you will be lucky if you even have a single championship
because everyone knows that your going to once again lose to Graduation Bear. And tonight
you will lose to either me or Perfection At It's Best. And if you think your going to walk out on
your match tonight like you did the last time me and you were in a tag team match.. Then you
got another thing coming. You think this match is going to last 10 minutes? Well if that's what
your expecting then you matter fact just give up your title tonight because you should already
know how the Golden Falcon's style. Just like the Heart Break Kid, I don't think it is titles that
leads you to the path to become a legend, its the actions you do for your company. And if I
continue to put on great matches then I can truly say that I am on my way..
Match 1: Amie
Match 2: No contest
Match 3: Straight Edge Punk
Match 4: Dark Demon
Match 5: Golden Falcon
Main Event: Graduation Bear, Deadman 4 Life, and British Connection
12 / 15
13. Nancy asks…
high school senior year SCHEDULE HELP!?
Im about to start my senior year in high school but im having trouble with my schedule. My
school's scheduling is messed up so im facing trade offs. I was originally supposed to have 5
periods instead of 7. (6th being lunch). First semester I was suppose to take AP Statistics, AP
Gov/Econ, AP Biology II, Marketing, and English 101/102, and second semester i was
supposed to take all of these but switch out of either AP stats or marketing, and retake trig pre
calc honors to higher my grade/gpa. but now in order to take all of these classes, i need to stay
a full day both semesters, first semester is now all of these classes, but study hall 5th period
and then english 7th period, making me stay a full day, and second semester is now all of these
except instead of study hall i have trig pre calc honors. SO now im faced with a tough decision.
OPTION 1: Stay with my full day schedule, including study hall. or OPTION 2: change AP
Gov/Econ to normal gov econ, and take out trig pre calc honors second semester, and have 5
periods. Most seniors in my school only take 4 or 5 periods, and i really want to get out early (5
periods) so my question is do i take out what could possibly look good to colleges and have a
half day? or keep them in but have to stay a full day? thanks
thank you. but you reminded me, i forgot to add that the college im most likely going to is in In
state college that doesnt require much. But I am trying to get the highest scholarship possible.
Do you think taking the extra AP will increase my chances of getting a better scholarship?
Steve Winston answers:
13 / 15
14. I would keep it because if not taking these classes keeps you from getting to the school you
want to go to you will have wished you kept all the classes.
Joseph asks…
Should I trade Daniel Thomas for Frank Gore? Will Gore be better?
I have AP and Fred Jackson at RB. Thomas is my flex right now. Would Gore be a better flex
the rest of the season? I want someone that is dependable to start every week at the flex.
Daniel Thomas is young and has a lot of upside. He has played very well, averaging 101 yards
a game rushing but he's only played 2 games his whole career in the NFL. Gore is proven but
aging. And Gore really struggled at the beginning of the year before finally having a good 100
yard rushing game last week. Who is the better option to have the rest of the year?
Yea, good point. I forgot to mention that. How do you guys think Daniel Thomas will be affected
by losing Chad Henne at QB? Henne wasn't great but Matt Moore is HORRIBLE!
Steve Winston answers:
Yes, Gore will probably do better but Thomas is really good. If they give Thomas a chance he
14 / 15
15. will destroy the other team. Gore is a starter and plays every game so I'd go with him. Gore isn't
as good as Thomas but plays more often. He is old so he has a good chance of an injury, so
don't be surprised if he ends up on the IR.
Conclusion:
Make this trade. Gore is the guy you want for this position.
Sandra asks…
this Message goes out to Any potential ppl that knows more than I
do about Fantasy Football and are willing?
to help just by giving your opinion on how I selected my team as a newb ffLerT. Any help will be
much appreciated. ty
Its an ESPN 8 team snake league and I had the 5th overall. Ty for your time BTW
15 / 15
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