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 | Brought to you by The War Room |
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| How to Buy Options for Less Money |
| Karim Rahemtulla, Head Fundamental Tactician, Monument Traders Alliance |
 | Learn all about this unique and simple technique. |
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Ninety-nine percent of the investing public does not know about this unique and simple technique.
This type of investing involves spreads, and today I will share my favorite types of spreads!
What Is a Spread?
A spread is the gap between the bid and the ask prices of a security or asset, like a stock, bond or commodity.
So if you wanted to do a spread on Barrick Gold (NYSE: GOLD), for example, you would pick two points, let's say $20 and $30. The spread is $10, the difference between the two points. Once you establish your spread, you can place a trade.
There are quite a few types of spreads. The most common are bull call spreads, just like what War Room members did on SmileDirectClub (Nasdaq: SDC), bear put spreads, diagonal spreads and calendar spreads.
There are many more complicated ones, but these are the ones we use most in The War Room.
A calendar spread is a strategy established by simultaneously entering a long and short position on the same underlying asset but with different delivery dates and the SAME strike price.
For example, let's say that Barrick was at $20 per share and you think it will go up, but not more than $23 within a couple of years.
With a calendar spread, you would buy the $23 option that expires in January 2023 and sell the $23 option that expires in January 2022.
If the 2023 call were trading for $2 and the 2022 call were trading for $1, your cost would be $1. Your goal is for Barrick to close at $23 or below so you keep that $1 free and clear. Then you get a chance to sell more options or just have a reduced cost. If it goes over $23, you would still make money, as there is more time value left on the $23 option expiring in 2023.
The goal of all spreads is to limit your dollar outlay. This is done by buying an option and selling another option against it, like a covered call.
A diagonal spread is a modified calendar spread involving different strike prices. It is my favorite type of spread.
I use diagonals when I want to reduce my cost and have significant upside. In this case, I would buy an option that expires in 2023 and sell an option that expires in 2022 against it. That way, I reduce my cost. I would still hold my 2023 option but with reduced cost and over a year left to go, it's a win-win situation.
Action Plan: If you want to learn more about spreads and how to trade them in real time, sign up for The War Room now!
Yours in smart speculation, |
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Karim Rahemtulla, Head Fundamental Tactician
Monument Traders Alliance |
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| Recent War Room Winners |
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| TBIO | | 4/29/2021 | | 27.18% | | COIN | | 4/29/2021 | | 5.43% | | CRM | | 4/28/2021 | | 15.56% | | CRSP | | 4/28/2021 | | 8.00% | | CYRX | | 4/27/2021 | | 9.38% | | Biggest War Room Winners | | BG | | 5/26/2020 | | 320.00% | | DIS | | 10/13/2020 | | 198.81% | | FDX | | 9/18/2019 | | 188.49% | | NUGT | | 8/17/2020 | | 179.31% | | FSLR | | 10/28/2020 | | 160.15% | | Fastest War Room Winners | | LMND | | (4 minutes)
12/7/2020 | | 36.67% | | ROKU | | (4 minutes)
9/10/2019 | | 53.62% | | MCD | | (5 minutes)
1/8/2020 | | 24.39% | | OKTA | | (5 minutes)
1/6/2020 | | 27.50% | | RGR | | (8 minutes)
1/6/2021 | | 73.33% | | WMT | | (Fastest double)
1 hour, 20 minutes 7/7/2020 | | 121.12% |
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| WAR Room Testimonials |
| | |  | KenWin April 29, 2021, 9:42 a.m.
Thanks BB, I sold RBLX at my sniped price of at $3.49 this morning during meeting for 39% gain. Was in at $2.51 yesterday. | | | |
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| | |  | Tad April 29, 2021, 3:08 p.m.
In TBIO at adjusted basis (after 2nd sell) of $8.99, out at $15.80 for a combined profit of 75.8%. THX KR!! | | | |
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