From Theory To Practice - April 14, 2021 - Core Strategies: Vertical Spreads and Dynamic Wings

published 4 weeks ago by tastytrade, Inc.

Normally when we think of a defined-risk strategy, we think of our wings as being static, where we target a given dollar amount as our width. Well as Kai shows us today in our Core Strategies series, this does not need to be the case. We can just as easily add a dynamic element to our defined-risk strategies, such as Vertical Spreads, by targeting a specific delta for each leg of the strategy. Interestingly, as we do this, we learn that both underlying stock price and implied volatility factor into just how wide these dynamic spreads will be.

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