Here are some guidelines to identify key criteria to a successful straddle trade: 1. Stock price must move within the target time frame The stock price will need to move up or down sufficiently to offset the loss of time value in the call and put that form the...

The diagonal calendar spread uses a different strike price in the near-term option than in a longer-term option. This can be a credit spread or a debit spread. For a diagonal credit spread: the strike price of the long option is out-of-the-money. the strike price of...

A modification of the calendar spread, the ratio calendar spread trade have more contracts sold than bought. With more long contracts, this removes the constraint on one end of the profitability range, thereby allowing for unlimited profit if the stock price makes a...

Typically, volatility skews for calendar spreads between 10% and 25% work best. Be suspicious of volatility skews between 30% or greater, particularly when both options have unusually high IVs. An unusually high volatility skew often means that the front-month options...

Also known as horizontal spread or time spread. These trade work bet on stocks or ETFs whose price moves within a reasonably narrow range. Volatile stocks that can move up or down 15 percent within the time frame of one month are generally not suitable for calendar...

Extra premium has been pumped into the price of the option being sold. The underlying stock price needs little or no movement to achieve maximum profit. 1 and 2 can be realized using front-month options. Look for an event that produces a major move in the price of...