Advanced Options Overview

The Advanced Options order entry screens simplify the process of entering Complex Option orders. By displaying potential pairings based on your spread ranges, expiration months, or by amounts “in, at, out and near the money” all entered at one net credit or debit price, Complex Option strategies can be entered more quickly and with potentially less market risk than by “legging in.” In addition to saving time creating the order, having direct access to an exchange (if available) may improve the quality and speed of the execution by routing both legs of the order immediately and electronically.

To Trade Options on StreetSmart.com® select the Trade/Options tab. Then choose the Basic (for single leg strategies) or the Advanced (for multi-leg strategies) button to set up an order.

Click on the links for descriptions of each type of complex option order:

SHigh : High Strike Price in two option strategy

SLow : Low Strike Price in two option strategy

* Collar Max Gain/Loss assumes the collar is put on in conjunction with a long stock position.

** This column describes the effect of time decay on the respective strategy holder's position.

*** The discussion of Calendar Spreads that follows is for the debit spread only.

+ Max. Gain for Debit Spread is unlimited only after the expiration of the short option. Max. Loss for Credit Spread is unlimited when the long calls expire prior to the short calls, in which case, the position would not qualify as a spread for margin purposes.

++ The gain or loss with time for calendar spreads applies only during the period when both options in the spread have not yet expired or been assigned. Once the near-term option has expired or been assigned, the situation will reverse (Gain will change to Loss and vice-versa.) Although not common, calendar spreads may be neutral.

‡ For Ratio Spreads, since you are short 2 contracts vs. 1, time decay will "generally" be in your favor, but technically it depends on if you establish this position for a credit or debit. For Back Spreads, time will "generally" be working against you, but again this depends on whether you establish this position for a credit or debit.

Commissions, taxes, and transaction costs are not included in any of these strategy discussions, but can affect final outcome and should be considered. Please contact a tax advisor to discuss the tax implications of these strategies. Many of the strategies described herein require the use of a margin account. With long options, investors may lose 100% of funds invested. In-the-money long puts need to be closed out prior to expiration, since exercising them could create short stock positions.

Options carry a high level of risk and are not suitable for all investors. Certain requirements must be met to trade options through Schwab. Multiple leg options strategies will involve multiple commissions. Please read the options disclosure document titled "Characteristics and Risks of Standardized Options." Member SIPC