Options Education – A Ratio Spread on the S&P500

Options Education – A Ratio Spread on the S&P500

Paragon Options is our futures option service which is intended to manage the risk of trading futures with various options strategies. This is an education article that we hope will expand your understanding of options as well as provide you with a trading idea for this week.

This weeks blog post  is looking at a 1×3 ratio spread in the S&P 500 and how it can be used as a directional as well as volatility play.  Volatility is currently elevated in S&P options at around 35% and this strategy exploits this.  The structure is in the video below.

 

Conclusion

As you can see from the video, this structure can be extremely profitable from a zero outlay of capital.  It is multifaceted, starting with a negative delta, meaning on any fall in equities it can be closed out for a profit, slowly flipping to a long delta over time, benefiting hugely from time decay as well as being short volatility.

To learn more about trading Futures Options, please sign up for a  FREE TRIAL to  PARAGON OPTIONS by CLICKING HERE.

About the Author

Matt
Matt is a highly experienced options trader of 18 years, having been a private client broker and an inter-dealer broker in the city of London as well as working internationally in Australia during the commodities boom. He is an expert in options greeks and their vagaries, as his positions are usually comprised of multiple strategies with him trading the net greeks rather than its individual positions. Matt is adamant that a comprehensive awareness of risk and greeks is vital to becoming a successful options trader and is able to set out options in a very clear and understandable way even for the beginner.

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