This is how you utilize your brokerage account to score the biggest potential profits from Cannabis Lots.
We know a lot of folks who joined Cannabis Power Trader are new to Cannabis Lots, so we wanted to review the different option strategies your brokerage account offers.
As one of our members commented, “My trade account has these options: single order, covered calls, vertical call spread, vertical put spread, calendar call spread, calendar put spread, straddle, strangle, and custom as my only choice. I don’t want to make the wrong trade”.
We appreciate the caution, and we are going to work on answering as many of your questions as possible.
These trades can move quickly, and we want to make sure you feel comfortable with placing them.
An easy way to think of the different investing strategies is by viewing it as pulling different levers. If you are just buying stocks, you only have one lever – stock prices going up.
But options allow you to utilize multiple levers.
You can profit from rising and falling stock prices, moves that happen over a specific period, changes in expectations for risk, and even when the stock doesn’t move.
So, let’s take a look at the different trade types your broker offers to make sure you can quickly enter the right trade.
Cannabis Lots Order Types
Single Order: A common trade recommendation is to enter a long call or a long put. These are single order trades. It is one position in either a call or a put. You are buying the option, and your loss is limited to how much you paid for it. When the stock price rises, the price of the call rises. When the stock price falls, the price of the put climbs.
Covered Calls: A covered call involves the stock and a call option. Specifically, you buy the stock and simultaneously sell a call option.
A covered call allows you to own the stock but still make a profit even when you expect the price to fall, stay the same, or maybe only rise by a certain amount. By selling the call, you collect what is called the premium. The premium is the price for which you sold the option. If the stock price doesn’t rise more than you expected, then you get to keep the money you collected when you sold the call. You also get to keep the stock. Effectively, this is a way to buy the stock for less.
Vertical Call Spread: When you see an alert that involves buy and selling calls simultaneously with the same expiration date but different strike prices, this is a vertical call spread.
“Vertical” means the expirations are the same.
The trade below is an example of a vertical call spread.
When the strike price for the call that you sell is higher than the strike price for the call that you buy, this is a bullish vertical call spread and you will profit when the price rises. When the strike price for the call that you are selling is lower, this is a bearish vertical call spread.
It’s bearish because you profit from a decline in the stock price.
Vertical Put Spread: Buying two puts with the same expiration but different strike prices is a vertical put spread.
A bearish vertical put spread means you buy a put with a higher strike price and sell a put with a lower strike price, like in the example below.
A bullish put spread is when you do the opposite.
So, if the trade alert involves buying and selling puts with the same expiration date, you would enter a vertical put spread.
Calendar Call Spread: Calendar spreads describe option positions with different expiration dates.
Calendar call spreads involve buying and selling calls simultaneously, even for the same strike price, but with different expirations. These have bullish and bearish features, just like vertical spreads explained above.
But for a calendar call spread, the effect that the passage of time has on the profitability of the position plays a critical role.
Calendar Put Spread: When you see an alert that requires buying and selling puts with different expirations, that’s a calendar put spread.
You now know that, in addition to a single order for a call or a put, you have two types of spread trades. Vertical means the expiration dates for the options are the same, and calendar means the expiration dates are different.
But what about when you enter a trade that involves both calls and puts? That’s what straddle and strangle trade types are for.
Straddle: A straddle is an option trade where you buy or sell a call and a put, but with the same strike price. Buying both a call and a put is a long straddle. Selling both a call and a put is a short straddle.
Strangle: A strangle is basically a straddle, but with different strike prices. So, just like with straddles, long strangles have you buying both a call and a put, and short strangles have you selling, but the strike prices are not the same.
Long straddles and strangles are designed to profit from big moves in stocks, regardless of the direction of the move. Whether the stock price rises or falls, you don’t care – so long as the move is big.
Short straddles do the opposite. Even if you expect the price to do nothing, options give you a way to profit.
Custom: The above trade types cover the most common option trades, but they are by no means the only types of trades you can put on with options.
When a trade alert involves both a call and a put, but you are buying one and selling the other, then a custom order type is what you should choose.
To your investing success,
NICI Staff Reports
9 responses to “Speed Your Way to Cannabis Lots Profits”
October 03 2019