I have been looking at Bull spreads recently because of a few recent binary losses where it went from $97 to 0 in a heart beat…
If the Dow30 bull spread was at 18000 (with a 100 point spread) and lets say I thought it would go up today and I got in at 18010
the underlying would be around 18004/18009 (BID/ASK) around the time I got in. It would cost me around $10 per contract plus the .90 cent commission (if < then 10 contracts). My maximum loss would be $10 and I would have a chance to make $90 if the DOW30 hit about 18100. Am I figuring this correctly?
im guessing your saying
18000 to 18100 is the spread
YM at around 18004/18009
the ask on the spread is 18010
this being the case risk is price entered minus floor on a buy
18010-18000 = 10 ticks at $1.00 a tick would be a $10 risk
You can make up to $90 on teh spread
for every tick above 18010 the dow finishes you will make $1.00 on the spread
if the dow finishes at or above 18100 you will make max profit of $90 on that specific $100 spread (there are wider spreads)
You can lose up to $10 on the spread
for every tick below 18010 that the dow finishes you will lose $1.00
If the dow finishes at or below 18000 you will lose a max of $10
You do not have to exit no matter how far it moves against you - and you are free to exit at any time to say take profits - ie dow moves up 50 points and you take profit at say 18060 to capture a $50 profit
(no commissions (no broker) - but the exchange fees are .90 on entry per contract up to a max of $9.00 per order)
(on exit fees are are .90 on exit up to a amax of $9.00 per order - with no fee if the spread/binary expires out of the money)
Make sure to consider
- time to expiration
- breakeven distance
- risk $
- profit Potential $
- risk/reward ratio
in that order when choosing the spread (order layed out on scanner)
