prvtrader 7:42 am on Friday, February 26, 2016

BTO SPY Apr2 189.5 Call…

BTO SPY Apr2 189.5 Call and STO Mar4 199.5 Call for a 8.83 Debit.
BTO IWM Apr2 99 Call and STO Mar4 104.5 Call for a 3.93 Debit.

Steve 8:17 am on Friday, February 26, 2016

Hi prvtrader:
Could you please explain your interesting strategy here? Thanks.
Steve
- fuzzballl 8:34 am on Friday, February 26, 2016
  
  Looks like he’s taking a bullish position on the overall market by buying calls out in the beginning of April and selling shorter term higher strike calls to finance.
- prvtrader 8:42 am on Friday, February 26, 2016
  
  These are Bullish Diagonals….they have a better probability of profit than a Debit spread.
  The reason is that your short option will expire a lot faster than you long option and therefore you’ll be able to sell several options against your long until you have to make it into a vertical debit spread. You can make money in two of the three ways the market can go, and you can minimize your risk due to the shorts. You’ll make money if the market stays stagnant and if the market goes in your direction; you’ll lose on the long option if the market goes against you, but you can minimize the loss by selling options against your long, over and over.
  It is similar to a covered call, but instead of having to buy the stock, you buy a longer expiration option.
  I normally buy a Delta 70 or 75 with at least 45-50 DTE and sell a Delta 25-30 with at least 25-30 DTE. The idea is to allow the short option to pay for the extrinsic value of the long option.
  In some positions, you can get a free long option if you hold it long enough.
  These work great on IRA accounts.
  Hope this helps.
  - fuzzballl 8:45 am on Friday, February 26, 2016
    
    That’s what I meant to say!…LOL Nice explanation
    
    🙂