4-Way Option Spread

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Performance - Plain and Simple. A 4-Way Option Spread is the same as an iron condor spread. The option strategy sells an out of the money put spread and an out of the money call spread at the same time. The quantities are equal on both sides, and the option expiration month is the same. If the stock is equidistant from the short strike prices, the position is also delta neutral.

Some traders also use the 4-way spread to take advantage of declining option implied volatilities. Indexes are well-suited for this option strategy because diversification eliminates the surprise component found in individual stocks. An index option also gives traders time to adjust the position as the market migrates to one extreme. Only one of the spreads can possibly be in danger and the margin requirement is the difference between the strike prices on one side less the total credit received.

The option margin requirement also represents the maximum position risk. For in-the-money call options, intrinsic value is the difference between the stock price and the An option premium is the price of the stock option. It is comprised of intrinsic value and time Stock options are a wasting asset.

From the day you purchase them, their value goes down if the A time premium is the amount by which the price of a stock option exceeds its intrinsic value. An option ask is the price an option seller wants to receive for the option.

If the option is Ten-up Option Market - Market Makers provide liquidity and they are members of the exchange. LEAP stock options have more than six months until expiration. They can have a lifespan of up to Options have a defined life and option traders select the duration that matches their forecast The Time Value of an Option is the amount by which the price of a stock option exceeds its Stock Option Parity means that the stock option is trading at its intrinsic value.

An option bid is the price an option buyer is willing to pay for the option. If the stock option An option delta measures the change in the price of a stock option relative to the change in the An Option Gamma measures the change in Delta for every one dollar change in the underlying price A call option gives the buyer the right, but not the obligation, to buy the underlying stock or Option Strategies - Good and Bad!

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