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I just want to let you know I have been searching far and wide on an easy explanation of vertical spreads and you are an amazing teacher. I finally get it hearing it from you. I have been a long time fan of yours and first started looking into your content when I got into selling covered calls and cash secured puts. Currently, looking to do more research on the buying side but like you said sometimes you’re tying up so much money to potentially lose. This is a great strategy to mitigate that. Just a quick question though. Is closing out the options the same as closing out any other option, you just do the opposite. You sell to close the one you originally bought, and buy to close the one you originally sold?
Agreed, amazingly simple explanations. Definitely, allows newbs like myself to have a better understanding of the concepts to which further research is necessary to make these something I can add to my tool belt. I'm subscribed to the channel, keep the lessons coming!
Jake's great. Probably my favorite Trading channel out there. To answer your question, yes I believe. But don't take my word for it. Up until this point I have never had to sell to close.
Thanks Vu! I actually was an elementary school teacher in South Korea for 6 years before joining the Air Force. So I have experience and I do consider what I am doing on TH-cam to be teaching. Cheers!
So for the Bull Call Spread example, assuming the stock price went up to $530, would I have to manually close both of my positions (i.e. sell to close Call #1, then buy to close short Call #2)? Or just let them expire and wash against each other?
Expiration: If you let the options expire, both options will be automatically exercised. This means: You'll buy 100 shares of the underlying stock at the lower strike price (Call #1). You'll immediately sell those 100 shares at the higher strike price (Call #2). The difference in strike prices will be your profit, minus any premiums paid.
I love Bull Call Spreads but I always buy the furthest dated LEAPS and buy the ATM Call & sell an OTM Call to increase my POP. I usually look to close at 25-50% profit. I'd say I've made money with this strategy at least 80% of the time.
Hi Jake, Great pair of videos! I'm sure you would ideally do vertical spreads on high volume securities, right? But if you were to do it on a low volume security, would it be possible for one leg of the chain to execute but the other not, leaving you with a naked call/put? Or does the broker treat this spread as a single transaction?
Hey Austin! Yes, I would argue you only trade spreads on stocks with a market cap of 100 Billion or more. And yes, your broker should treat it as a single transaction and you can set it as a market order or a limit order for the spread.
Thanks so much Jake, I was getting too much anxiety before understanding spread options. Calls and puts are much easier, but with spreads it's weekly profits for me. You're a great teacher!
For these spreads if you really only getting the premium because everything else will expire could you sell the stock after you get the premium? Also love your video's would it be possible for you to show to buy or sell options with a small account may be 1or 2K?
Hello I’m trying to do a project for one of my finance classes, I am trying to do a Bull Call Spread for Apple but everytime I look at the strike prices in options most of the strike prices are well below the stock price of Apple which is 170.40 can u explain why this is?
Hi Jake, great video! Really clear. Not sure I understood the last part. If the options is out if the money don't they just expire worthless? From what you said it sounded like the loss is unlimited
dude, you're the bomb, subbed and will donate. Brilliant vids the way you explain spreads. I spent 6.5k on a trading course and they can't (or won't) explain how spreads work. Keep up the good work.
Hi Jake, I have a question. I would like to apply Option Level 2 at Schwab, but it requires margin on my account. If I am accepted, can I trade spreads or iron condor without using margin? I have enough money to trade, and don't want to use margin. Thank you :))
Hi Jake If your debit spread is deep in the money with a couple weeks before expiration, are you able to, and is there any benefit, to close the call option you sold?
Hey Nakjam! If you want to close the short leg you sold, then you would only do this because you think the share price will keep going up. There is benefit to this if you are confident the share price won't turn against you. But then at this point you are just holding calls.
Hey Sh B! I am going to start up my Schwab trading challenge again soon and I will be trading spreads. They are just more efficient for my money. Faster leverage basically than just buying long calls!
![Bull Call Spread TUTORIAL [Vertical Spread Options Strategy]](/img/n.gif)
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Debit Spreads honestly helped me build up my smaller account. With only needed as low as $50, it can add up over time. Great video!
Thanks MC PF! For sure, debit spread can be explosive!
Awesome. Great to hear.
Thank you so much this makes sense now thanks again
You are welcome Hassane! Cheers!
I just want to let you know I have been searching far and wide on an easy explanation of vertical spreads and you are an amazing teacher. I finally get it hearing it from you.
I have been a long time fan of yours and first started looking into your content when I got into selling covered calls and cash secured puts. Currently, looking to do more research on the buying side but like you said sometimes you’re tying up so much money to potentially lose. This is a great strategy to mitigate that. Just a quick question though. Is closing out the options the same as closing out any other option, you just do the opposite. You sell to close the one you originally bought, and buy to close the one you originally sold?
Agreed, amazingly simple explanations. Definitely, allows newbs like myself to have a better understanding of the concepts to which further research is necessary to make these something I can add to my tool belt. I'm subscribed to the channel, keep the lessons coming!
Jake's great. Probably my favorite Trading channel out there.
To answer your question, yes I believe. But don't take my word for it. Up until this point I have never had to sell to close.
I love the way you explain things. Have you thought of becoming a teacher? :-)
He can make much more $$ investing (trading) then being a teacher :)
@@wess8131 money is not everything. He is doing TH-cam is not really for money either :-). Maslow's hierarchy of needs!
@@vufirst he's making $100k/yr (mI'm assuming more, his subs have nearly double). This guy is humble and a spectacular teacher.
Thanks Vu! I actually was an elementary school teacher in South Korea for 6 years before joining the Air Force. So I have experience and I do consider what I am doing on TH-cam to be teaching. Cheers!
So for the Bull Call Spread example, assuming the stock price went up to $530, would I have to manually close both of my positions (i.e. sell to close Call #1, then buy to close short Call #2)? Or just let them expire and wash against each other?
Expiration: If you let the options expire, both options will be automatically exercised. This means:
You'll buy 100 shares of the underlying stock at the lower strike price (Call #1).
You'll immediately sell those 100 shares at the higher strike price (Call #2).
The difference in strike prices will be your profit, minus any premiums paid.
At 4:30 Why can't I just close the sell call and keep the buy call when it gets to that point?
I love Bull Call Spreads but I always buy the furthest dated LEAPS and buy the ATM Call & sell an OTM Call to increase my POP. I usually look to close at 25-50% profit. I'd say I've made money with this strategy at least 80% of the time.
Solid plays C P!
do you need 100 shares to execute this spread?
Hi Jake, question, when you are selling a credit or a debit spread, how do you make sure that both trades in the spread will execute simultaneously?
Hey Felipe! You can guarantee they both exercise by either doing a market order or a total cost limit order!
Hi Jake, Great pair of videos! I'm sure you would ideally do vertical spreads on high volume securities, right? But if you were to do it on a low volume security, would it be possible for one leg of the chain to execute but the other not, leaving you with a naked call/put? Or does the broker treat this spread as a single transaction?
Hey Austin! Yes, I would argue you only trade spreads on stocks with a market cap of 100 Billion or more. And yes, your broker should treat it as a single transaction and you can set it as a market order or a limit order for the spread.
What happens if someone exercised the call you sold out of the money? I know that’s 99.9% never going to happen but if it did?
Thanks so much Jake, I was getting too much anxiety before understanding spread options. Calls and puts are much easier, but with spreads it's weekly profits for me. You're a great teacher!
Does the DB Spread act as an instrument to, essentially, DISCOUNT a hedged position you've taken??
Great vid jake as always 🙏🙏🙏
Thanks Alfredo! Cheers!
Great explaination. Can I ask, is this you using Charles Schwab web based platform in your examples? Thanks.
Very interesting, I think I like the Credit Spreads better though.
I agree! I like the credit spread better as well!
For these spreads if you really only getting the premium because everything else will expire could you sell the stock after you get the premium?
Also love your video's would it be possible for you to show to buy or sell options with a small account may be 1or 2K?
Hello I’m trying to do a project for one of my finance classes, I am trying to do a Bull Call Spread for Apple but everytime I look at the strike prices in options most of the strike prices are well below the stock price of Apple which is 170.40 can u explain why this is?
Does anyone have a video that shows how to close a stop limit order debit spreads on TWS?
Hi Jake, great video! Really clear. Not sure I understood the last part. If the options is out if the money don't they just expire worthless? From what you said it sounded like the loss is unlimited
great video, easy and clear explanation. thank you so much
Thanks for watching uyen Le! Cheers!
Any videos explaining how to end these trades with your brokerage when the expiration date arrives.
dude, you're the bomb, subbed and will donate. Brilliant vids the way you explain spreads. I spent 6.5k on a trading course and they can't (or won't) explain how spreads work. Keep up the good work.
9:13 return is 22% not 122%.
550/450 = 1.22-1 = 0.22 * 100 = 22%
The $550 is the return. You paid $450 and made $1,000, so you returned $550 which is 122% of $450.
How to manage a debit spread gone or going wrong by rolling out or other methods, thanks
is this the same thing as a poor mans covered call/secured put?
so the debit spreads are a little more profitable than the credit spreads
Hi Jake, I have a question. I would like to apply Option Level 2 at Schwab, but it requires margin on my account. If I am accepted, can I trade spreads or iron condor without using margin? I have enough money to trade, and don't want to use margin. Thank you :))
Iron condors I think requiere 4 legs. And that would be level 3
Hi Jake
If your debit spread is deep in the money with a couple weeks before expiration, are you able to, and is there any benefit, to close the call option you sold?
Hey Nakjam! If you want to close the short leg you sold, then you would only do this because you think the share price will keep going up. There is benefit to this if you are confident the share price won't turn against you. But then at this point you are just holding calls.
clear explanation!
Thanks Green B! Cheers!
Call debit spreads on FB January 23 is amazing
Possibly!
Really good thankyou.
Thanks Jake, 💯👍👏👏👏👏
Informative Jake. No more videos on Calls anymore?
Hey Sh B! I am going to start up my Schwab trading challenge again soon and I will be trading spreads. They are just more efficient for my money. Faster leverage basically than just buying long calls!