One thing lacking here is the best practices for trade management - whether it goes in your favour or against you. What steps should be taken for each case. The entry and exit rules must be clear…not just the concept.
There's a 3rd adjustment available as well, morphing, where we close the short and ride positive Delta of the long leg if the underlying goes against our credit spread 🤑
There is a typo on "Final Value of Put Credit Spread......." slide where the SPX price is 4101.26 but should be 4401.26. I was confused for a moment, thought I was losing my mind haha. Appreciate the information you are putting out there, very helpful the way this is explained. Thanks
If both contracts are in the money before expiration Does the broker automatically exercise the long call if the short one got exercised before expiration?
Therefore, it may be better to close positions and/or address rolling prior to the expiration, which would also open up the opportunity for more cycles throughout the year as illustrated in your covered call strategy video.
Excellent video. The only 2 challenges are that at expiration volatility typically spikes and if your short call or put is in the money it can get put to you or called away.
then you roll them depending on where you are with the moneyness of the spread or close it at a minimum loss and move to another trade if you cannot roll or rolling is not feasible or you are simply a chickenshit and do not want to risk waiting till expiration to see if the spread will move OOM
@@MertDincMDMD yes…! This have had to be discussed in the video! You can’t teach someone how to drive a car pushing the gas pedal without teaching them how to push the brake pedal or the hand brake 🙃
Hi.. I’m confused with the Premium numbers on some tickets, eg PLUG shows Premiums of .01, .05, .05, .50, .53, .05 consecutively as we go further OTM … why this discrepancy in these prices? Could we do put spread options using these ?
you do not need to own any shares to perform credit spreads! this is the beauty of credit spreads. You only need to put up the money for the cost of the spread and receive the credit. The money you put up front minus the credit you receive is the risk of t he trade...basically
@@whendoigettosayfuck No you do not! the long arm of the spread covers the short, you only need to have the money for the cost of the spread. I do not think you understand the fundamentals of options trading or credit spreads. Once you close the long arm by selling it then you expose yourself and hence your broker will require you to have the funds to cover the full amount of the short leg (sell). But in order to enter the trade if you open and close the spread as a spread you do not need to have the full amount of the 100 shares..
I like the depth they go into on trades that work but what about trades that go AGAINST you? How much is the trader risking? Is it 1:1? 1:10? This seems to be a common theme in all their videos and I believe there would be more views if these videos encompassed not only the positive but the negative.
You can find this when you pull up the trade on your platform. It will show you profit / loss calculator and maximum potential losses so you can evaluate this before you execute. But yes, I think they should cover that here. It's probably not good for their business or channel though, in the long run
I had to replay that twice because I was actually reading the screens and you go from the chart reading a close of 4401 to a tally screen, at roughly 4:55, reading the close at 4101 and I'm thinking "that's a losing deal..."
How to place an order either for Call or Put credit spread based on Volatility. If the volatility is high then chance of getting more credit/income. Where to check or any tool available for selecting the spread?
@@bryanb6193 Thanks! Is there tools that gauge for placing a trade say for example the spread could have costed around $1 due to high volatility but later the same spread become around $0.50.
He is in the middle of intensive mentoring with about a dozen students. He's been with them most of the day so will be busy for another few weeks. He'll get back to them when the mentoring ends.
You made another mistake on the chart for the Put credit spread. The close should say $4401.26 and not $4101.26. The chart starts at 4:58. I hope to start trading with your desk soon!
you should consider closing a winning spread at or above 50 percent profit and move to another trade if you want to increase your winning rats. If you are waiting till the expiration you are missing the point!
"giant zone" - 90% of the time - the vid is not about current conditions - rolling sure - I hate keeping trades that aren't working alive...kills mindset
this is the basics of credit spreads if you want to learn how to handle a failing spread there are ton of videos for advanced strategies..this is an informational video and useful
@@tdtesla I do not break spread by selling the long arms. This opens your limited loss exposure to an unlimited loss and sets you up for an unwanted stock exercise possibility. If you are too deep in the money just close the spread and take your loss and move on. The beauty of a spread is your loss is limited there is no need to turn it into an unlimited loss setup. Also, i do not get into spreads with the hopes of getting assigned. I want to keep my capital and potentially grow it if and when i average my wins over the losses. Finally, if you are confident the spread will come through you can roll it for credit or even if you are confident with the outcome.
If it’s a spread you need to be ok with max loss!! Or buy it back before it hits max loss, roll out in time with wider wings adding risk for a credit Turn it into an iron condor adding credit but adding risk to the other side. But ultimately you need to be ok with max loss
SMB Options Workshop (free) tinyurl.com/2s4m8ard
One thing lacking here is the best practices for trade management - whether it goes in your favour or against you. What steps should be taken for each case. The entry and exit rules must be clear…not just the concept.
Outstanding Commentary, as usual!! Thank You!!!
There's a 3rd adjustment available as well, morphing, where we close the short and ride positive Delta of the long leg if the underlying goes against our credit spread 🤑
There is a typo on "Final Value of Put Credit Spread......." slide where the SPX price is 4101.26 but should be 4401.26. I was confused for a moment, thought I was losing my mind haha.
Appreciate the information you are putting out there, very helpful the way this is explained.
Thanks
Yes, I observed that too, I was confused until I figured it out nevertheless the information is very valuable. Thoroughly enjoyed it.
I was also confused lol but i caught the error.
Very good video, Thanks
Appreciate the efforts 😊
If both contracts are in the money before expiration
Does the broker automatically exercise the long call if the short one got exercised before expiration?
Therefore, it may be better to close positions and/or address rolling prior to the expiration, which would also open up the opportunity for more cycles throughout the year as illustrated in your covered call strategy video.
Can you please do a video on the “ break & retest “ strategy? Thx
The title at 5:00 has the wrong closing price (4101 that should be 4401); Thjese typos gan really get you.
Excellent video. The only 2 challenges are that at expiration volatility typically spikes and if your short call or put is in the money it can get put to you or called away.
index are not assigned
And why didn’t you discuss the very possible scenario of index closing below your put credit spread strikes? 😉
then you roll them depending on where you are with the moneyness of the spread or close it at a minimum loss and move to another trade if you cannot roll or rolling is not feasible or you are simply a chickenshit and do not want to risk waiting till expiration to see if the spread will move OOM
@@MertDincMDMD yes…! This have had to be discussed in the video! You can’t teach someone how to drive a car pushing the gas pedal without teaching them how to push the brake pedal or the hand brake 🙃
On the graphic for final cash flow on first trade. The graphic shows incorrect closing price on SPX: 4101 vs 4401.
Exactly!!! I got confused and rewatched that multiple times. Their mistake.
Hi.. I’m confused with the Premium numbers on some tickets, eg PLUG shows Premiums of .01, .05, .05, .50, .53, .05 consecutively as we go further OTM … why this discrepancy in these prices? Could we do put spread options using these ?
7:06 Is it Buy to Open or Buy to Close?
One thing to remember too is you can’t do this unless you have enough cash to buy 100 shares s of whatever you are trading.
you do not need to own any shares to perform credit spreads! this is the beauty of credit spreads. You only need to put up the money for the cost of the spread and receive the credit. The money you put up front minus the credit you receive is the risk of t he trade...basically
@@MertDincMDMD you don’t need to own them no but you need the cash in your account to or they won’t let you sell a put or call
@@whendoigettosayfuck No you do not! the long arm of the spread covers the short, you only need to have the money for the cost of the spread. I do not think you understand the fundamentals of options trading or credit spreads. Once you close the long arm by selling it then you expose yourself and hence your broker will require you to have the funds to cover the full amount of the short leg (sell). But in order to enter the trade if you open and close the spread as a spread you do not need to have the full amount of the 100 shares..
SPX is cash settled
Gotta get approved for a higher options tier
I like the depth they go into on trades that work but what about trades that go AGAINST you? How much is the trader risking? Is it 1:1? 1:10? This seems to be a common theme in all their videos and I believe there would be more views if these videos encompassed not only the positive but the negative.
You can find this when you pull up the trade on your platform. It will show you profit / loss calculator and maximum potential losses so you can evaluate this before you execute. But yes, I think they should cover that here. It's probably not good for their business or channel though, in the long run
I had to replay that twice because I was actually reading the screens and you go from the chart reading a close of 4401 to a tally screen, at roughly 4:55, reading the close at 4101 and I'm thinking "that's a losing deal..."
5:08 the slide says "closes at 4101.26" I think you mean "4401.26". It's the only way this makes sense.
I like the credit spread strategy How much can you lose in this strategy and how to save a losing trade
What are the margins involved?
How to place an order either for Call or Put credit spread based on Volatility. If the volatility is high then chance of getting more credit/income. Where to check or any tool available for selecting the spread?
Your broker should have a built in tool for option volatility. It a + or - number on the options chain.
@@bryanb6193 Thanks! Is there tools that gauge for placing a trade say for example the spread could have costed around $1 due to high volatility but later the same spread become around $0.50.
Missing the weekly bar-by-bar lessons from Justin!
He is in the middle of intensive mentoring with about a dozen students. He's been with them most of the day so will be busy for another few weeks. He'll get back to them when the mentoring ends.
You made another mistake on the chart for the Put credit spread. The close should say $4401.26 and not $4101.26. The chart starts at 4:58. I hope to start trading with your desk soon!
We all make mistake sometimes but that mistake really made it confusing for a beginner like me.
Didn’t cover information on DTE choices
you should consider closing a winning spread at or above 50 percent profit and move to another trade if you want to increase your winning rats. If you are waiting till the expiration you are missing the point!
@@MertDincMDMD
I was talking about choosing daily, weekly or monthly DTE’s
"giant zone" - 90% of the time - the vid is not about current conditions - rolling sure - I hate keeping trades that aren't working alive...kills mindset
It is misleading (and even irresponsbile) to cover this topic w/o addressing how you would handle a trade that goes against you.
this is the basics of credit spreads if you want to learn how to handle a failing spread there are ton of videos for advanced strategies..this is an informational video and useful
This is a good point - what would you do?
@@tdtesla I do not break spread by selling the long arms. This opens your limited loss exposure to an unlimited loss and sets you up for an unwanted stock exercise possibility. If you are too deep in the money just close the spread and take your loss and move on. The beauty of a spread is your loss is limited there is no need to turn it into an unlimited loss setup. Also, i do not get into spreads with the hopes of getting assigned. I want to keep my capital and potentially grow it if and when i average my wins over the losses. Finally, if you are confident the spread will come through you can roll it for credit or even if you are confident with the outcome.
If it’s a spread you need to be ok with max loss!! Or buy it back before it hits max loss, roll out in time with wider wings adding risk for a credit
Turn it into an iron condor adding credit but adding risk to the other side. But ultimately you need to be ok with max loss
Small reward versus max risk, one trade goes bad and it wipes out 8 profitable trades
I trade spreads daily. This is the worst explanation for beginners I have seen. And how about trade management?