Understanding Debit vs Credit Spreads l Options Trading
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- เผยแพร่เมื่อ 31 พ.ค. 2024
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Join Tony Zhang, Chief Strategist of OptionsPlay & CNBC Contributor of Options Action as we take a deep dive into debit and credit vertical spreads to understand how they differ. Learn the best practices for each strategy and how to optimally manage the positions.
Slides @ www.dropbox.com/s/jkm0j487it6...
Manage Smaller Winners into Home Runs: • Manage Options Positio...
Optimal Credit Spreads: • Finding the Optimal Cr...
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What did you find most helpful from this video on Debit & Credit spreads?
It has been helpful for me to hear this information again. I listened to an earlier video which Tony made on this same subject, plus have been trading for about 6 months with Tony's help. Good to refresh my memory on best practices. Plus, I learned there is a video I missed dealing with rolling options that I can and intend to view very soon. Plus I check out the credit spread spreadsheet for new ideas everytime I'm in OptionsPlay.
I am a fairly new option trader (just about 8 mo)......the most helpful thing I found in this video was when to place and get out of trade as far as expiration date goes to avoid gamma risk.
Thank you for all you do Tony......you are helping me tremendously,
Your advice about getting out of losing trades, and accepting a loss when you're wrong on a move - very nicely said.
Definitely the stop losses and when to roll...would like a seminar on rolling. Excellent Webinar
@@RKC51246 That's great Ronald. I'm glad you find those resources helpful. Hoping for your continued success!
Great video. We all strive for financial independence and better life. It’s not difficult in achieving this through the right investment, living frugally, and budgeting. I’m glad I learned early in life to work hard for financial freedom
In my opinion, venturing into a good investment is not just a strategy for generating passive income but a profitable saving method for future expenses. Those who fail to make the right decisions early in life end up regretting it. Nevertheless, investing can be difficult and risky doing it solely, For this reason, I advise seeking help from professionals(financial advisors). It’s not just watching videos and reading investment books the challenge is using them well.
@@BrunoLuke sincerely, I’m truly inspired by your words. I’m very interested in investing and I have got a good sum of money which I’m ready to put in with the right information. My biggest fear is losing my money on the wrong investment. For this reason, I’m willing to listen to your suggestions and ideas on how to invest wisely.
@@MarcusFred-wn3iv As an OAP with a lot of experience, I firmly believe that the success of any investment depends on having the right information, regardless of what others say, do whatever you set your mind to. Warren Buffer always says "be greedy when others are fearful and be fearful when others are greedy". This is certainly the trick to succeeding even when others fail. I made $100,000 working with MARTHA ALONSO HARA a licensed financial adviser . It’s been a promising experience so far with her.
@@BrunoLuke Please, how do I connect with your financial planner?
@@MarcusFred-wn3iv quickly do a web check where you can connect with her, and do your research with her full name mentioned
I have been through multiple spread trading videos and was struggling. This training of yours solidified my understanding and has enabled me to trade spreads with greater confidence. Thank you 🙏
Tony thank you for this super webinar. Much appreciated.
Thanks for watching!
Excellent Tony
This was a great lecture Thanks for putting it up on YT
Glad you enjoyed it!
I love how long these videos are, thank you.
I greatly appreciate your content. Particularly the more advanced topics. I appreciate that you don't infuse the videos with fluff
Great to hear that!
Tony, another great presentation. I'm experienced and still found this interesting and valuable. Newbies will definitely find this useful.
Thank you Brian!
I love how we can see the difference between buying a debit spread / vertical call and selling a credit spread / vertical put. How you explained it well starting and transitioning from the basic call, then progressing to buying vertical spread to selling vertical puts. More power to Options Play. Looking forward to seeing you in Options Action. 🙂🙏🚀
So grateful also for the free trial on Options Play. 🙂🙏
Excellent video. I am obsessed with credit and debit spreads!
Thanks Bilal!
Always a pleasure to learn from your videos Tony!
Thanks for your support!
I love all your videos and I watch them all many times. Thanks Tony. I just have a question about debit spreads, I know with credit spreads, you can leave them to expire worthless, my question is can we do the same with debit spreads or we need to close them before expiration date?
Thank you! Great teaching!
Thanks!
Nice good job teaching people options thanks 😊 😊
Thank you, Walter!
great teaching here !!
Thank you!
beautifully presented. Thank u
your video is very well explained and the strategy actually work. I still have trouble selling credit spread and one bad trade can loose a lot. Still try to find a way but thank you
Thanks so much Tony. I find ur video so beneficial. I paid couple thousand to attend an option course and came out not having full understanding. ur course is so well presented and clear. Thanks so much.
Glad to hear you have found the videos helpful!
This is why I subscribed!
Excellent explanation!! 👍
Thank you!
Wish you and the family a Happy New year. Appreciate what you do, love how you break down the steps and the reason. I learned so much from you. Keep up the work👍. 祝你新年快樂身體健康.
Thank you so much, I really appreciate that!
now i am ur big fan~~ thanks a lot
great information
Thanks for the videos Tony. Can you please explain why one wouldn't do a call debit spread with both legs ITM. In a sense it should be similar to a put credit spread but you won't receive the credit immediately.
Hi Tony. I’m new with options and hesitation with do TimeSpread because I don’t know how the tax work? Is tax count as how much we collect or debits amount or individual leg? Thanks in advance!!
Thanks Tony, I knew most of it but the rules of thumb for structuring spreads were new to me and something I’ve been unsure of.
I know! I always get something from listening to someone elses instructions! I’m sure you are a Very intelligent person!(I mean that, not being sarcastic!)
thank you Tony
great content
Thanks for watching!
Hi Tony, I watched your other video titled "Enhance your equity position using options". In that video, you mentioned if you sell a an out of the money put and if the stock price reaches the strike price, your brokerage will automatically assign you the stock. In this case the max risk is having to own the stock at the strike price. However in this video, your example shows selling a put at the strike price. Why or is it possible to sell puts at the strike or ITM since the brokerage will assign you the stock? If yes, why would you want to do so? Tony or anyone can comment please? Thank you
Not seen that other video, but the answer to your question is that a brokerage will only automatically assign you the stock if the put is in the money at EXPIRY (basically the long put holder's brokerage would automatically exercise that person's option, and you as the person on the other side of their trade would be required to buy their shares). Brokerages don't automatically assign you at any time prior to expiration. The long put holder could theoretically do it at any time, but they would be giving up any remaining extrinsic value in their put. That's one of the reasons you should always close out your option positions prior to expiration.
Tony, you have said that volume and open interest have nothing to do with if we should trade the strategy or not. But if we trade a strategy with no volume and no open interest would it not be extremely hard get out of the trade when you want to get out early and take profits or stop loss? Also, when you sell a put or a call do I have to have 100 shares of the underlying or enough money to cover the 100 shares for collateral?
On a Credit spread, to close it our and take profit when you sit 50% do you Buy to close the short leg or sell to close the long leg? Or close both of them at the same time. And maybe I am mistaken.
On the question on buying credit spread and selling debit spread on the same stock: Do it the other way around and you will end up with a call condor or a call butterfly. Much better potential profit return
How exercising works in case of debit and credit spread?? In what scenario am i going to be obliged to exercise
Late to the party, but for the first call example, if the max risk for XYZ is $4, that would be a .04 premium? Shouldn't the breakeven be $100.04, or the risk would be $400 right?
good lecture! a credit of 33% of the spread is not easy to obtain
Pretty easy if 45 days out.
@@skylerskyler2144 Still not
Not too shabby at all
Can you do a video that explains what Price to choose to EXIT a Call Credit Spread and Put Credit Spread with a 50% Profit before Expiration?
If the combined option price for a Call Credit Spread is .90 nd I want to EXIT with a 50% Profit, do I set my EXIT Price higher or lower than .90 to EXIT the trade with a Profit?
If the combined option price for a Put Credit Spread is .90 and I want to EXIT with a 50% Profit, do I set my EXIT Price higher or lower than .90 to EXIT the trade with a Profit?
I have yet to see a video explain and show step-by-step on ThinkorSwim how to determine what EXIT Price to set when placing an EXIT Order for a Call Credit Spread or Put Credit Spread before Expiration.
maybe I missed it but I do not quite understand the concept of buying a 50 delta call/put and selling a 20 delta call/put how are these levels defined what exactly does 50 or 20 delta mean.
Was wondering the same thing. Have you figured it out? It seems like it has to do with taking a lower probability trade in order to have better risk reward.
If it won't sell bid at 0.00, my only option is to buy to close right?
1
Excellent video Tony. You have a typo on your Optimal Credit Spread slide. It should say the R/R is (2:1). Just so you know.
Thank you for pointing that out Gerald!
when buying.....its hard enough picking direction....with what ever catalyst....news, your perceived perfect set up, indicators look great, relative volume high, day volume trading 10x avg volume...day price action broke 9 day ema....blah, blah, blah, its hard to catch Direction AND Magnitude, and theta eats into your cost
how do you have a max gain with a Buy Call?
There isn’t a Max Gain with a Buy Call, only a Buy call Debit Spread has a Max Gain.
2
Also, on the Optimal Debit Spread, you wrote 37% winners and 66% losers. Did you mean 33% winners and 67% losers?
I was wondering about that too. On the face of it it sounds like a losing strategy
4
I can't get into the meeting
Tony, you said that your call has to reach breakeven before you profit but that’s not true. You can be in profit before you hit your breakeven. Did I misunderstand what you said?
Okay
picking up pennies in from of freight train...... I was laughing for 10 mins. not only its so funny but because is true as well
The difference between debit and credit vertical spreads is that there isn't any difference. They are synthetically the same, but people like Tastytrade (and I guess this person) say use them differently just so they can explain different ways to use verticals (and they do that after saying they are the same a dozen times}.
I think it would be better if people just were told the truth... and let other criteria like... using debit spreads in American style options, since Debit spreads have less of a problem of the short leg getting assigned before expiration. (That doesn't happen a lot (with credit spreads}, but it's a hassle when it does)
Although I have studied options since 2017, the main reason I don't invest in options is the unknown. If I buy 100 shares of a $10 stock and it goes to $15 my $1,000 investment is worth $1,500. The same isn't true for options. There's no easy way to figure out what my investment is worth at $11, $12, $13, $14, or $15. The Black Scholes model doesn't help me figure out what my investment will be worth at a specific price point. I don't like the unknown.
You come start off tiny or in a "paper trading" account and get a feel for how things work. See if it's something you might be interested in.
You can buy a call on a 100.00 stock for 4.00? you mean 400.00 dollar 4.00 a share
Imp lol
Good to see how you guys came up here to show keen appreciation to Mr Donald Clinton .this was exactly how I got recommendations about Mr Donald Clinton ,at first I was a bit skeptical but eventually I gave him a trial with my little investment and I got huge profits
Despite the economic crisis,I'm so happy my life has changed totally, I've been earning $18000 returns from my $6000 investment every 13 days
Tony, you have said that volume and open interest have nothing to do with if we should trade the strategy or not. But if we trade a strategy with no volume and no open interest would it not be extremely hard get out of the trade when you want to get out early and take profits or stop loss? Also, when you sell a put or a call do I have to have 100 shares of the underlying or enough money to cover the 100 shares for collateral?
You do not need someone else on the other side of the trade to get in/out of a trade. If you buy a call option that requires lets say 50 shares to hedge that risk, as long as the market maker can buy/sell 50 shares of that stock (multiplied by the # of contracts you are trading) that is how liquidity is determined. OI and volume has nothing to do with it their ability to buy/sell 50 shares of the stock.