I was Googling , and I came across this description of a bear call spread.    Bear Call Spread. I quote , bear call spreads are “nice low risk, low reward strategies”. Yes, until IV spikes, then the calls you sold as part of the spread rise.

I don’t disagree with the article. I agree with it except……they leave out any discussion of what happens when IV drops.

Sure, IV may not be a ‘intro’ options trading subject, but understanding IV is essential to understanding spreads. When you leave out even a mention of how the greeks affect a spread, you are doing traders starting out a disservice.

How many of us have gotten caught by guessing right on a stock direction, but getting IV wrong and losing money ?

This entry was posted on Thursday, June 28th, 2007 at 12:10 am and is filed under Ranting.