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Strategies & Market Trends : Option Spreads, Credit my Debit -- Ignore unavailable to you. Want to Upgrade?

To: jjs_ynot who wrote (543)	2/15/1999 5:50:00 PM
From: NateC	Read Replies (1) \| Respond to of 2317

You wrote <<Did you prefer butterfly spreads to pure credit spreads esp. if you had a sense of direction for the underlying and could leg into it?>> because some of us are at a sl. more "junior" level.....could you explain the terms here to be sure we're all on the same page. do you mean by "credit" spreads....any spread that results in "cash out", or money being put into your acct.. (bull put spreads usually do this) as opposed to "debit spreads"..where you are out some $'s...as in call spreads??? when you say "leg into it"., I'm presuming that you're talking about waiting for stock movement....down for buying a call leg.....to allow you to get a better price on the call you need to buy to complete the spread. Is my interpretation of the jargon close?

To: jjs_ynot who wrote (543)	2/15/1999 6:06:00 PM
From: KFE	Read Replies (1) \| Respond to of 2317

Dave, Actually prefer writing nakeds versus T-Bills to anything but a divorce has put a dent in my risk capital. Most of the time pure credit spreads are preferable because you make money if the stock stays the same, goes your way, or goes slightly against you. Also good chance of no commissions getting out because both sides should expire worthless. A butterfly spread has to finish at or close to middle strike price and will most likely have to be held until near or at expiration. If the spread can be put on for no debit or a credit then it can't be beat because you are at no risk except for early exercise no matter which direction the stock goes. Also, unless you are paying discount option commissions a butterfly spread can turn into an alligator spread. Leg into butterfly- contradicts purpose, you might as well just trade the individual options. However have tried to leg out of butterfly that went against me. Ken