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Backspreads
Now you can unleash the power of backspreads with Tom's concise summary of backspreads. Check it out now; you'll be glad you did.

Written by Tom Whitney, CTA
Website: www.optiontoolbox.com
For more information contact Tom Whitney at 805-351-9300 or email tomwhitney1@msn.com


While not a secret to professional option traders, few inexperienced traders have heard of backspreads.Profits aren't guaranteed but backspreads might be the right weapon for your next battle with the market. The benefits of a backspread are:

  • unlimited profit potential
  • controlled risk (maximum loss potential known up front)
  • can profit if market moves higher or lower (if placed for a credit)
Since many of us process information visually, look below at the risk and reward graph of a call backspread in gold. The hypothetical backspread was created on 6/4/99.

Graph of backspread




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CAUTION:

TRADING COMMODITIES, STOCKS AND/OR COMMODITY OR STOCK OPTIONS INVOLVES RISK. MONEY CAN BE LOST AND/OR MADE TRADING ANY SECURITY AND/OR OPTION. PAST PERFORMANCE OF A TRADING SYSTEM OR MARKET IS NOT NECESSARILY INDICATIVE OF THE FUTURE PERFORMANCE OF THAT SAME SYSTEM OR MARKET. MOCK TRADING AND ITS HYPOTHETICAL PERFORMANCE RESULTS ARE INHERENTLY LIMITED AND SHOULD ONLY BE USED AS A LEARNING TOOL AND NOT A MEASURE OF FUTURE PERFORMANCE. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL, OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE DISCUSSED WITHIN THIS SITE, SUPPORT AND TEXTS. OUR COURSES SHOULD BE USED AS LEARNING AIDS ONLY AND SHOULD NOT BE USED TO INVEST REAL MONEY. IF YOU DECIDE TO INVEST REAL MONEY, ALL TRADING DECISIONS SHOULD BE YOUR OWN.


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