Trade traversal is a tool that helps traders keep track of their trades. Our community takes an approach called risk reversal. This approach emphasizes the use of financing debit trades with credit, ultimately creating trades that have little to no risk, while maintaining the high reward.
For example, a user purchases the following option:
- BOT 5 MSFT 8/21 215/220 Vertical Call @ $0.80.
He also opens the following trades to finance this trade to reduce the initial debit.
- SLD 5 MSFT 8/14 217.5/220 Vertical Call @ $0.45.
- SLD 5 MSFT 8/14 202.5/200 Vertical Put @ $0.55.
Initially our trader paid a debit of $4.00 for his trade. Now that he has sold shorter term options against this position he was able to collect $5.00. Our trader now has a long position on MSFT not only for free, but for a total credit of $100 profit. He still maintains his upside gain of $2100 if MSFT closes above 215 after 8/21.
Our tools enable our traders to organize their trades and track their running P/L so they can effectively manage risk and increase their profits!