The call backspread strategy is a very aggressive strategy, which is why it is only recommended for risky investors. The call backspread strategy just more tips here is somewhat similar to the trend-following strategy. The differences are that investors in the call backspread strategy with their actions anticipate the trend and that they are not applied in all markets.
How the strategy works
Investors sell calls at a low exercise price and at the same time several calls with a higher exercise price. However, all have the same runtime. website link just A heding is dispensed with here because the investor assumes a significant price rise. In addition, the investor is hedged by the sale in the event of a trend reversal. If the investor is correct with his forecast and the rates go up, he has the opportunity to continue the call backspread strategy while the trend continues indefinitely. However, it must be ensured that the profit threshold can be reached quickly.
If the investor's expectations are met and the trend content after continues, the investor may begin with out-of-the-money options that are comparatively favorable. In this case, there is only the risk that the exercise price will be reached during the term. That is why investors need to be very knowledgeable in the markets and to be able to prove their fingers' perception.
If the investor is analyzing the markets well enough, the call backspread strategy or the trend-following strategy can be pursued. However, it is difficult to assess whether the trend continues or does then my company not continue with its price gains. In the worst case, losses are possible if the price gains are very low. On the other hand, if the investor is disciplined in his strategy, the investor will be able to make a profit if the trend continues for a long time, if in visit their website the investor moves towards the trend-following strategy, the protective-put strategy, the long call or the married put strategy .
In principle, a change from the call backspread strategy is recommended if investors want to secure the profits achieved in the initial phase (for example after a trend change) and at the same time want to speculate my sources back further. This also reduces the risk if the price develops differently than expected. Investors can thus secure at least a portion of the profits accordingly.
Graphics: Call Backspread Strategy:
When is the application of the strategy useful?
The use of the call backspread strategy is particularly worthwhile in cyclical, highly volatile markets (eg stocks or commodities) and when the right entry date is caught. This is also true for the Forex market.
Before the call lowest price now backspread strategy is applied, the market environment must be analyzed. Not only the economic factors, but also the political events and their developments, play a role. This was illustrated by the political unrest during the Iraq wars and the "Arab Spring". Oil prices soared rapidly after the Arab region became one of the most important petroleum production areas.
Advantages and Disadvantages of the Call Backspread Strategy
The call backspread strategy offers great potential for high profits with low risk when the forecasts arrive and the price of the underlyings increases. Since at the same time options with a could more info low value are sold and several options are purchased at a higher price, the maximum loss can be calculated, which results from the