The Risk-free interest rate is the return on investment with no loss-of-capital risk. In practice, this does not exist. In theory, it is an important parameter in option pricing as it sets the baseline price upon which risk premium should be added. A practical estimate to the risk-free interest rate is taken from 'risk-free' bond issued by the government or agency where the default risk is practically zero.
A bear call spread is where a call is sold close to the current underlying price and the risk is fixed by purchasing another call with a higher strike price. A bear put spread is where a put is purchased close to the current underlying price and lower strike put is purchased to reduce the trade cost. [click to read more]
Similar to a calendar straddle. A calendar strangle involves buying a long term strangle and selling a short term strangle simultaneously. This is a neutral options' trading strategy.[click to read more]
A strategy with the goal of profiting from most market condition: up, down, or range-bound by selling more out of the money calls than in the money call are purchased. The risk in this trade is if the underlying appreciates too quickly beyond the expected move implied [click to read more]
An option spread strategy in which credit (premium) is received by trader through selling more premium than debit to be paid for long options in the same underlying stock but different strike prices or expiration dates.[click to read more]