Best Trading Vehicles for Riskier Market Plays

Debit Call Spreads are really the best. This trading vehicle has a lower break-even and delivers higher returns. You can afford to put ten times less capital at risk. Here is an example.

In our recent post we described the ORCL “Slur and Slurp” Play. Every one can participate in this play. It is enough to buy the May 17/20 Call spread at $2.50. The underlying security price is $20. So, you put at risk only a small fraction of it.

This spread means that you buy the May 17 Call at $3.60 and sell the May 20 Call at $1.00. You win, if the ORCL stock price stays above the 19.50 level on May 16^th. The maximum return = $0.50/$2.50= 20%.

All market plays are risky, especially, for small investors. Option spreads give outstanding possibilities for everyone to join “big boys” in very many market plays. In this example, the very worst that can happen to you is you lose the initial debit -$2.50.

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