Two options with different market prices that an investor trades on the same underlying security. The higher priced option is purchased and the lower premium option is sold - both at the same time. The higher the debit spread, the greater the initial cash outflow the investor will incur on the transaction. For example, assume that there is a investor holding a call option who sells it for $2.50. Immediately following this sale, the investor buys another call option on the same underlying security for $2.65. The debit spread is $0.15, which results in a loss of $15 ($0.15 * 100).
Although there is an initial loss on the transaction, the investor is betting that there will be a significant change in the price of the underlying security, making the purchased option more valuable in the future.
Irrelevance Proposition Theorem
Balance Sheet Reserves
Taxation in a Bear Market
What`s in Store for BRIC Economies?
Dangers Surrounding Bonds this Time
Investing 101: Psychological Traps for Investors
Reasons for Ditching a Mutual Fund
SEE FOREX TUTORIAL
How Much Does a Home Remodeling Cost?
Student Loans: Repaying Debts Faster
Retirement Planning: Allocating and Diversifying
The Concepts of Economics: Scarcity
|20:00||FOMC Member Loretta Mester Speaks|
|01:30||National CPI ex Fresh Food||Sep|
|01:30||Tokyo CPI ex Fresh Food & Energy||Sep|
|01:50||Summary of Opinions|
|10:30||M4 Money Supply||Aug|
|10:30||Net Lending to Individuals||Aug|