A multi-leg options order is an options trading order that involves the simultaneous purchase or sale of two or more options contracts. Multi-leg options orders can be used to trade a variety of different options strategies, including straddles, strangles, butterflies, and condors. Multi-leg options orders can be placed online or over the phone with a broker. What is a butterfly trade? A butterfly trade is an options trading strategy that involves buying and selling three options contracts of the same underlying asset with different strike prices. The strike prices of the three options contracts form a "butterfly" shape when graphed on a chart.
The butterfly trade is a neutral trade that profits if the underlying asset remains within a certain range over the life of the options contracts. The trade is typically structured so that the maximum profit is realized if the underlying asset is at the center strike price at expiration. The maximum loss is realized if the underlying asset is at either of the outer strike prices at expiration.
Butterfly trades can be constructed using options of the same expiration date or options of different expiration dates. The trade can also be constructed using all calls or all puts. What are the three types of options? There are three types of options: American options, European options, and Bermudan options. American options can be exercised at any time before expiration, while European options can only be exercised at expiration. Bermudan options can be exercised at certain predetermined times before expiration.
What are the four types of options?
There are four main types of options: puts, calls, covered calls, and naked calls.
Puts: Puts give the holder the right to sell an asset at a set price (the strike price), on or before a certain date (the expiration date).
Calls: Calls give the holder the right to buy an asset at a set price (the strike price), on or before a certain date (the expiration date).
Covered Calls: Covered calls are a type of options trade that involves simultaneously holding a long position in an underlying asset (such as shares of stock), and selling call options on that same asset.
Naked Calls: A naked call is an options strategy in which an investor writes call options on an asset without owning the underlying asset.
Which broker allows deep OTM options?
There is no definitive answer to this question as it depends on a number of factors, including the broker's trading platform, the type of options traded, and the trader's own preferences. However, some brokers that allow deep OTM options trading include Interactive Brokers, TD Ameritrade, and E*TRADE.
What is a complex option order?
A complex option order is an order that consists of multiple options contracts. These orders can be used to execute various trading strategies, such as spreads and straddles. Complex option orders can be created using a broker's trading platform, or they can be created manually.
Spreads are the most common type of complex option order. A spread involves buying one option and selling another option. The two options can be of the same type (e.g. two call options) or they can be of different types (e.g. a call option and a put option).
Straddles are another common type of complex option order. A straddle involves buying both a call option and a put option. This strategy is often used when a trader is expecting a big move in the underlying asset, but is not sure which direction the move will be.