Review of "20X YOUR MONEY WITH THE VICTORY SPREAD | EP. 102"

 


The victory spread's goal is to create a situation where one can take advantage of expected strong movements of a stock.  Here are some features of the victory spread:

  1. Typically, one receives a credit.
  2. There is unlimited potential profit.
  3. Max loss is limited.
One might create a victory spread contract when there are, say, earnings calls.

Here is the structure of a victory spread:
  1. A short ITM call option is sold above the price that a downward move might update the price of a stock.  This gives the short call option a chance to expire worthless.
    1. The expiration date of the short ITM call option is after we expect the price changing event to occur.
  2. More than one OTM long call option is sold at a date later than the ITM short option.
    1. The number of contracts for these options should be low enough to result in a net credit for the overall contract. 
I'm not 100% sure how to do the following:
  1. How far into the future should the long options' expiration date be?
  2. What should be the strike price?
The loss region looks like a band that straddles the current price and moves to the northeast.  One can think of it as a long call (see the first figure below) transformed into a positive credit strategy that pays out less on positive price moves, but has a both a lower max loss and a possible profit on a negative price move (see second figure).





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