11/30 Advanced Trading Lab Notes

Discussion Notes
11/30/09


~ We continued the conversation from the last few weeks about calendars and diagonals. A few key points came up.

1. You want to have a good time gap (at least 2 months and up to 6 months in expiration time) in between the long option and the short option.

2. A cheaper debit is not necessarily a good thing. You'll end up paying too much in commissions and there might not be enough difference between the option you buy and the one you sell to create a profit.

3. It is very important that the short leg that you sell has value.

4. Delta's are not as critical for this strategy as they are for other strategies.

5. When looking at the risk graph the most important thing is the breakeven point. Make sure you're comfortable with where that point is....in fact that might be the deciding factor from one candidate to the other.

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• • •
Tim Justice
Educator and Mentor
Financial Market's
TIGRENT
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