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Gamma sign

16 Jun

Like the other Greeks, gamma can be either positive or negative. Here is one key difference to remember: positive gamma positions will see their gains accelerate and losses decelerate while negative gamma positions will see their gains decelerate and losses accelerate.

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Exit strategies for Credit Spreads

11 Jun

In this example a PCLN bull put credit spread.

Bull put credit spread for Priceline :

Sell 1 DEC 600 strike put @-$11.10 (-$1,100.00 per 1 contract)

Buy 1 DEC 595 strike put @ $10.20 ( $1,020.00 per 1 contract)

Initial net credit = -$ 0.90 ( $ 90.00 for 1 contract spread)

Maximum risk / margin requirement = $ 4.10 ( $410.00 for 1 contract)

Percent maximum return = 22% ($0.90 max. gain / $4.10 requirement)

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