With all the headlines we’re seeing from Eastern Europe, not to mention talk of rising interest rates, volatility is shaking up the markets… making it hard for traders to lock in consistent gains.
That’s why now — more than ever before — it’s important to consider what makes any given trade a good play so you can increase the odds of locking in a winner.
So New Money Crew’s Lance Ippolito wanted to take some time to elaborate on a question he received in his Daily Profits War Room: How wide a spread is good to play, or is it dependent on the cost of the stock?
In short, Lance likes to look for a spread of about $0.10… But that can vary depending on the price and average volume of the underlying stock.
Let’s take a closer look at what he means, using some options spread examples to put things in perspective…
Believe it or not, but the stock market’s stagnant 70% of the time… So time decay is eating away at options, and traders everywhere are paying for it!
It’s no surprise that the Chicago Mercantile Exchange says 76.5% of options expire worthless.
So when rare and large moves in the markets occur, people often watch their trading accounts get wiped out time and time again. It’s a frustrating whipsaw of action that demoralizes traders.
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