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.
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26th Apr 2020