Options Trading Mastery: Time Decay and Volatility Trading Opportunities (5)

Either way, the spread will have to be constructed with the at-the-money option being long if you feel volatility will increase or short if you feel volatility will decrease.


If you feel the stock would most likely fall, you will have to decide between buying a vertical put spread and selling a vertical call spread.


Again, either way, the spread will have to be constructed with the short option being the at-the-money.


As you can see, the vertical spread does not have to be used only in directional scenarios.


It is very versatile allowing the investor several choices among a diverse group of potential uses.


It also affords limited risk, albeit limited profit potential, to both the buyer and the seller.