Credit Spread Options Strategies Explained (Guide w/ Examples)



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49 thoughts on “Credit Spread Options Strategies Explained (Guide w/ Examples)”

  1. Hi! Do I HAVE to sell and buy an option as a standard set up? I mean why buy if you are confident that the stock price will stay above (if we sell put) the strike price? Wont it be more profitable?

  2. Great explanation…thankyou.

    Could you post a video explaining how far the spread should be for max profit with using the least margin.

  3. Thank you very much for taking the time to provide us all this helpful information. You
    are doing us a great service. Sincere regards!

  4. Please help:
    1st Trade
    I’m sitting on Call Credit Spread. Not sure what to do next.
    SPY $471/$472 Calls
    $0.59
    @ -63.89%.
    Exp date 1/7/22

    Stock is already at $471 now. Should I wait until it expires of Close credit spreads?
    ——————
    2nd Trade
    I’m sitting on Put Credit Spread. Not sure what to do next.
    BABA $115/$110 Puts
    $0.94
    @ +3.09%.
    Exp date 12/31/21

    Stock is already at $125.15 now. Should I wait until it expires of Close credit spreads?

  5. What if you do a call credit spread, let's say 25.50 and 25 , and it goes up over 25 how does assignment work if you sold a 25 call ? Would you have to close it out before expiration?

  6. I noticed in the call credit spread at (5:10) you stated both the calls are out of the money, however, wouldn't the short call 180 be in the money therefore you collected the difference in premium?

  7. I really appreciate how you explained this. I have a problem visualizing these set ups and you helped crystallize it for me. What are your thoughts about setting a stop loss for this type of trade? 20 % 30 % ?

  8. great video!! do you automatically get assigned if the stock price goes up to your sell leg or does that only happen at expiration?

  9. Do I need to enable margin on my account? TOS says I don’t have margin enabled and that why I can’t trade put credit spread option.

  10. does the spread expiration have to be long? if i know a stock is going to trading sideways for a week, can i buy weekly spread?

  11. Watching this video compared to the other videos I’ve watched and articles I’ve read is like being taught basic addition and subtraction compared to fucking calculus. Thank fuck you exist, I’m now understanding how options aren’t just straight lottery tickets.

  12. Yall be careful with these credit spreads, if youre new, i think im screwed, i was under the impression that your maximum loss was credit minus collateral, so i did two play credit spreads as just a mess around, max i should have lost was $19, but the when i look at the 4 contracts, and add up the two, then subtract the other two, im at a loss of over $600, i dont understand, it says account deficit, literally my two orders were a credit of $490, a collateral of $500, then the second was a credit of $141, collateral of $150, max loss supposed to be $19, the profit loss analysis showed $19 max loss, but i think im screwed, if it changes after the orders are done fully pending then i will update this comment, just trying to warn people, i did a bunch of research, clearly not enough, but i did do a bunch before trying these credit spreads out, they seemed simple and logical enough, every dang youtuber i watched even said maximum loss is credit minus collateral but what ever… Update: nah its all good, i think what robinhood does, is itll give you data and notifications out of order, like im guessing the reason it looked like i was about to lose $600 instead of $19 is because the app didnt account for the credit i recieved, making it look like im down $600, when im reality it didnt calculate your credit into the whole thing, so if this happens, dont freak out like i did, its all good

  13. Yours was the first explanation to point out repeatedly that both options are allowed to expire worthless. Until now I believed that the trader would liquidate one, or the other, of the two options in his credit spread before it expired! Wrong.

  14. Hey Chris, thanks for the video. Could you please share your comments why you think this is probably the only strategy viewers would ever need, as I think you mentioned in the beginning? I know it is a popular one due to its cost and simplicity. But risking 3 to make 1 sounds off to me. Is it popular because the capital required would be lower than investing in a directional long call or put? What’s your take on it? Thanks!

  15. If you close credit spreads early can you collect less credit, or must they be teken to expiry, unless I did something incorrect on TOS paper trades I closed a credit spread early because I got a signal to exit trade after 4 days of a 21 day expiry and my profit was showing zero?

  16. What if your account like mine got a margin call for 100 shares of stock that I sold a credit spread call on that expired worthless the last minute of the day E*TRADE called and asked for 100 shares on a margin call on Harley Davison which was worthless at time of expiration I was so disappointed
    Maybe this is just an E*TRADE situation?

  17. this is a good basic explanation video. BUT…you leave out some very dangerous info that the viewers need to know about. 1. never let them expire 2. vega /imp vol can wreck a put spread even if the spread is OTM. 3. most brokers allow the option holder to excersice 1 and a half hours after friday close…these are serious ramifications

  18. Hi if it expires between the credit spread wouldnt it make the buy option expire worthless leaving you with sell options to account for?

  19. Finally a full explanation of credit spreads with profit and loss. Most importantly how the loss is calculated no tthat its hard to figure out most of these explanations don't show how to do it. THANKS!

  20. Why would you use a credit spread instead of a debit spread, if the risk to reward ratio is so much better on a debit spread?

  21. My question…as you set the spread up on Tasty Works like you did for LUV, then does TW execute the spread all at once? Or do you have to put each leg on yourself? And if it’s the latter, what happens in a real-time market as the prices are moving and you don’t get the spread you want as you’re trying to get in one leg at a time. Same with exiting…ok, if you wait until expiration that’s self explanatory. But what if you wanted to take an early profit…again,,do you have to exit one leg at a time, or???

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