Equity market volatility has elevated after the most recent concerns about a possible double-dip recession. Good traders should have a mental checklist of the strengths and weaknesses of all the trading strategies in their financial toolbox. When the market is falling and volatility is high, each strategy comes with its own unique concerns. A short time spread is a great solution to the age old dilemma of what strategy to trade when the markets are making you nervous about almost everything. There an two rules for maximizing profits on a time spread. Time spreads are worth the most when they are at-the-money, and once near the money, time spreads become more profitable as time approaches expiration.
OPTIONS STRATEGY Edward Laporte Futures; Aug 2010; 39, 8; Docstoc pg. 16 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
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