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The Best Vertical Spread Option Strategy 2022 - Proven Trading Strategies
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- Опубликовано: 14 авг 2024
- What's The Best Vertical Spread Option Strategy?
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- Intro 0:00
- 4 types to look at 0:23
- Call Debit Spread 1:10
- Market Opinion 1:57
- Put Debit Spreads 2:25
- Credit Spreads 3:17
- Trading a Call Credit Spread 3:26
- Put Credit Spread 4:30
- Market Outlook 4:58
- Call Credit Spread Example 9:01
- Credit Spreads 10:10
- Max Reward 10:56
- Maximum Risk 16:23
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How to choose the right strike price: • What Is The Best Strik...
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• The Wheel Options Stra...
Call Debit Spreads Explained: • Call Debit Spreads Exp...
Put Credit Spreads Explained: • Put Credit Spreads Exp...
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#StockMarket #OptionsTrading #verticalspread
To get the transcript of today's video, head to: www.rockwelltrading.com/articles/coffee-with-markus/best-vertical-spread-option-strategy-2/
Jeez, idk how many spead videos I've watched now bc it just wasn't "sticking", the one page chart with the same stock made it so clear
Thank you for the feedback. I try to make things as clear as possible in my videos 👍
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Agreed. For me, the other thing that made so clear to me is when he showed the market opinion, if you think the market is going up, or down, then which spread you should use based on your opinion of the market. I never really found a video that explained so simple and so well.
thank god someone actually knows how to easily put together an explanation on one page with an easy example. good job
Awesome! Thank you for watching! :)
Beautifully done!! Now, can you dwell on how to get in and out of these trades in regards to IV and spread ratios to capture the most returns please 🙏
@Markus Heitkoetter
You have omitted telling people how they can avoid MAXIMUM loss on credit spreads. That does not seem fair to me. Perhaps you explain how to adjust trades to avoid losses in another video?
I trade credit spreads all the time, and by using a stop loss 3x the credit received, I rarely have a net loss on the trade, especially when receiving 2 premiums by legging into an Iron Condor,(Having a call credit spread otm, and a put credit spread otm, working at the same time, with no extra BP used.) When the short option is stopped out, my long option is still working and can, and has greatly reduced the loss.
My experience has been that I get to keep all the premium, or keep a very small percentage of the premium, or have a loss at a less percentage than the loss on debit spreads that are not adjusted when the trade turns against you. Just my 2 cents worth to defend the credit spread strategy.
Good point TomD! My sons name is Tom D! :-)
Thank you. I've watched several tutorials on vertical spreads, and this is the most informative.
Awesome! Thank you for watching!
This is a nice breakdown of all four spreads. I used to have to find pieces of information from various places. Thank you Markus
You are welcome! I am glad that this helps! :)
While you can say a debit spread is better volatility time and speed will kill your spread if you get wrong any of the 3 key components. With credit spreads you do not have to let them get out of control as you can adjust if you are wrong. With a credit spread time is on your side as you get pay regardless of what the stock does as long as your strike is not touch. If your spread is wrong in this 3 keys you will lose big time.
1 if the stock does not move
2 volatility as options tend to be expensive
3 speed if the stock does not move much.
The BEST explanation of the difference between the verticals!
Thank you! :)
Markus, You have done an amazing work here. the best youtube video when it comes to explaining this type of materials. Thanks.
Thank you! I appreciate your feedback 😊.
Great explanation. I´m gonna save this video in my favorites. It is very useful.
Thank you for watching! ;)
Amazing for the breadth of information here, I had been looking for and so well done...Cant thank you enough for doing this..and looking forward to your other videos
Thank you for watching! ;)
Finally I can understand!! Thank you so much for breaking it down like this.
I'm glad you found the video helpful. I try to make these videos as clear, and to the point as possible 👍
Markus, I watch your videos regularly. I think you need to redo this comparison with the spread widths equal for all four strategies. Use a $10 width all four times and then show the differences in risk to reward. I think things will change and will be of much greater help to us new option users. Steve
Good catch Steven. I totally agree with you.
Also state the POP of debit spreads, not just of credit spreads.
exactly, he used different pricings examples for the 4 spreads and can't really tell which ones are more profitable.
Helps a lot to see them all on one page with examples. But regards to the risk vs reward, doesn't the strike price difference in each scenario be the reason for the poor ratio of credit spreads? They are only 10 apart where as the debit spreads are set at 50 and 30 apart. Or is this a better simulation of real life example? Sorry if that's a poor question; I'm just starting to explore these concepts and all kind of flying over my head.
I think so far this is the best explanation for the Vertical Spread! Thank you, Markus!
Awesome! Thank you.
Awesome explanation!!
I hope this helps! ;) Please subscribe if you haven't yet.
Yep! Still good teaching and relevant 3 years down the track!
Awesome! Thank you for watching!
I finally got it. I had to watchit and stopping many times to take note to get it right. Credit Spread is horrible. Thank you Sir.
You are welcome. I am glad that this helps.
why not? credit spread is amazing.
Excellent presentation. Next questions are: how far in the future should the spreads be exercised: Are Weeklys better than monthly? When is best time to exit? Thank you.
Mr. Heitkoetter, Thank you very much for this exact explanation of Spreads. My mind had a difficult time grasping this until I saw the video.
Hi A Cavern! I am glad that this helps. ;)
Well explained. Perhaps you can add on the effect on the closing option before and after expiration.
Awesome! Thank you for watching! :)
Really enjoyed your comprehensive chart. It helps to observe on one screen the types and outcomes of spreads.
Awesome! Thank you for watching! :)
Great video. Just read some books on the subject, so this makes much sense.
Not only do you have the best hair on the internet, your explanations are topnotch. Excellent videos. THANK YOU!
😊 You are welcome! I am glad that this helps and thank you for watching!
best illustrations i have ever seen。
Awesome! Thank you for watching!
Best explanation video of this category!!!
Thank you for watching! ;)
Glad I found your channel. Nice work. I will recommend you to friends as well.
Awesome! Thank you!
You explain very well at a decent pace - thnx
Thank you. ;) I am glad that this helps.
Very good example of how these spreads work. Now I might be able to realize some serious profits.
Thank you! :) To ensure that you are going to pick the right stocks you should equip yourself with the right tools. We have the PowerX Optimizer that does the guesswork for you. Here is a special link in which you can avail of a $1000 discount www.rockwelltrading.com/products/10-44-powerx-optimizer/
Wow 😲.All my doubts are clarified .Thank you so much
Thank you for watching! See you in the next episode! ;)
Wow! You explain this so well! Love your other videos too! They have helped me wrap my head around vertical spreads much better!
Awesome! Thank you for watching! :)
One thing about the put credit spread though is that as the price comes crashing through your position, you can sell the short as it reaches the break-even point (so you lose nothing) and just keep the long put to make money freely as the price goes lower. Keep your eye on the ball and your net premium is no longer your maximum gain. The only risk is that (a) the move will happen while you're not watching or (b) the price will end up in the little window between the spread break even point and the long put strike price.
you mean buy back the short put, and keep the long put?
Perfect sense. Best and most constructive explanation on option spreads that I've seen so far. Great job buddy!👍
Thank you for watching!
Thanks for explaining everything in one page.
Very strait forward.
Awesome! :) Thank you for watching!
A really nice overview on a one page Excel sheet. I have copied this spreadsheet and set it on my wall as a constant reminder of what I should be trading. Many thanks
You are welcome! I am glad that this helps.
What do you think using the volatility to decide long or short? In that theory, this stock volatility should be less than 50. Is this true?
Thank you Markus for discussing this interesting topic, I like the way you think.
This was very well explained, thank you so much! What of risk of assignment, when does this happen with debit spreads?
Getting the general idea. You do a good job explaining. Thank you!
You are welcome! I am glad that this helps! :)
Making best sense, thank you very much Markus.
You are welcome!
Thank you for the information and breakdown of all these options. I have been 'naked' trading (lol) for a while, and its incredible to me I do not know that many people in my community who are taking this approach to trading.
You are welcome, Zett. ;)
A very clear and graphic explanation you give here , by this way it is easier to understand.
I am glad that you find this easy to understand. :)
So clear, organised, professional. Thank you very much. Great Markus!
Awesome! Thank you for watching! :)
Best explanation & breakdown
Thank you so much newton! ;)
One of the best lessons I have seen.... great job! Debit spreads are my bell ringer. :)
Yes makes sense and the chart style is helpful
Awesome! :) Thank you for your feedback.
So far you have explained it better than anybody else. Kudos sir
Hi Johnny Miles, thanks for watching. And thanks for your feedback. Much appreciated. "See you" in the next video 👍
YES!!! it makes sense. I am just now seeing this video. And it all really "clicks" for me! So much so, I am not only "liking" the video... I am subscribing to your channel!!! Thank You for all this!!! I really want to learn and have spent a lot of time trying to learn, but couldn't seem to find anything getting past the basics/mechanics.
So far so good...very smart to put the various type of spreads in a table. Thank you so much.
You are welcome! I am glad that this helps. :)
Yes making very good sense, I understand now. Thanks
Awesome! I am glad that this makes sense to you. How are you trading so far?
Best explanation Markus.
Thank you for watching!
Yes...very straight and clear
Thank you! Was this helpful?
Yes!! Making sense. Thanks Sir Markus.
You are welcome! :) I am glad this helps.
Possibly the most helpful video on the subject. Thanks for the visual layout
😊 You are welcome! I am glad that this helps!
Perfectly explained
Awesome! Thank you for watching! :)
Markus, this is fantastic info. No one explains different spreads in such detail and gives such info and insight especially wrt 90% win rate and other hypes which I have heard too.
Awesome! Thank you for watching! :)
An excellent development, but it stops short. I would like to see on the last line the sum of the risk and reward times their probabilities as the mathematical expectation of the strategy.
How do you calculate the probability for a spread? Does your broker offer that detail? Think Or Swim seems like it can calculate probability of ITM OTM under the Analysis tab but I'm new to that platform. Etrade doesn't seem to be easy to navigate options information and calculating probability. Webull also seems to lack ease of understanding the probabilities. They do have a probably chart but it's not easy to understand what it's telling me
Do you use stop limit orders on these options spreads to further limit potential losses or no? or to Take profit at a certain percentage gain? How do you set that up?
Good question. Also, can you sell a Put credit spread instead of a cash covered Put, then accept assignment to an ITM Put while selling the OTM Put as you wish to hold the shares. In effect, would that make it a Cash covered Put with Insurance (in case of an extreme RIDE down)?
yes it is making sense.. very clear explanation.
Awesome! Thank you for watching! :)
Helped me a lot. Thank you.
Awesome! :)
Good stuff. Making sense. I saved this an keep going back to it.
That is awesome! ;) I am glad that this helps.
really like how you capture all this on one table - Thx
Awesome! Thank you for watching! :)
yes, this is making sense too me and you are going at a good pace.
Awesome! Thank you for watching! :)
Thank you for such a well explained video! I've been watching video after video trying to understand the concept and everything leaves me excited to learn more but confused on how to do it. This has helped tremendously. Subscribed!
😊 You are welcome! I am glad that this helps! Thank you for subscribing.
best explanation i have ever seen i always say only christians explain well i dont know if this brother is christian but its very clear and to the point thank you
Some of the world's best mathematicians have been Hindu.
I made a handwritten copy of this matrix chart. I refer to it all the time. And guess what....it's working. This chart w examples reminds me every time I put on a trade what to expect. Thanks !
Hi Philip Mills, thanks for watching. And thanks for your feedback. Much appreciated. "See you" in the next video 👍
All on one page!
Thank you for watching! ;)
Excellent video and the breakdown all on the same spreadsheet is perfect. What I believe was missing is the expiration dates.
Thank you for pointing that out! ;)
You may have answered this in another video, if so point me to that video. And if anyone else knows how to do this, then ...
Is there a way to place an option order for a if the option price reaches this price, then buy? I thought I saw it could be done when exiting an existing order, but can't figure out if possible to do when I want to enter a position. Thanks.
I've been trying to lock 🔐 these strategies in for a while.. Your video is even speed and with writing examples it is easier to retain the information... I am a bit trigger shy because of the horror stories of people getting assigned and loosing very big money 💰
Hi 261Pro, thanks for watching. And thanks for your feedback. Much appreciated. "See you" in the next video 👍
Nice explanation!
Hi John Anderson, thanks for watching. And thanks for your feedback. Much appreciated. "See you" in the next video 👍
Do any traders confine their options trading to just Call and Put Debit spreads to simply go long or short on large value stocks that they otherwise would not be able to afford to buy outright like SPY? And if so what percentage of spread would they use.
You explain well. Thank you
You are welcome! ;)
Very well done!
Thank you! :)
Yes, great job breaking down each component of the trade! 💯💪🏽
Thank you for watching! ;)
What an UNBELIEVABLY helpful video, thank you!
Awesome! Thank you for watching! :)
Good video. I thought the pacing is about right for what my opinion is worth.
It might have been useful to see probability of success added to the table.
Surely this a game of probability of success vs the amount that is gained or lost in the trade.
There is not really any channel I have come accross that seems to focus on finding a cheap trade i.e relatively high probability of success compared to the (highest gain to lowest lost) ratio.
The suggestion is having a view on the trade increases its value in one direction or another. How many of us trully know in which direction an asset is likely to move?
Still relevant and thank you for this info. It's 2024 now.
I am glad that this still makes sense! ;)
yes, making sense Markus!
Thank you for watching!
You explain things very well. This all reverts back to market direction. If you are right in the directional move of the U/L, you will do ok. My problem? I put a spread on a stock that I have researched, the option period does not have earnings or dividends, 5 out of 5 analyticals rate the stock as 'strong buy, good momentum, etc' Put on the spread,.....and the stock drops 11 pts in 3 days. IDK if this is because markets are at record highs now, and are so news sensitive that anything can cause havoc. Honestly, Im not kidding I have better results playing craps in a casino. Did an Iron condor on an ETF that has been trading in a $3 channel for 3 MONTHS! Had my strikes OTM, option analyzer showed 89% probability of (modest) max profit. Market opens the next day and the damn ETF price starts shooting up like a rocket....by 1pm, Im at risk of being assigned my short call. Had to bail at a loss. I think options, the stock market in general has become nothing more than a casino sadly. The only wise thing to do in times like these is wait for a substantial drop, then buy shares shortly after correction reverses.
great stuff. The spreadsheet makes it so easy to understand. before this video I watched someone else's of over one hour long and was really confused. Thank you.
Hi 一对一教练, thanks for watching. And thanks for your feedback. Much appreciated. "See you" in the next video 👍
@@rockwelltradingservices like the rest great video and new subscriber here. Can I get that spreadsheet?I’ll use it as a worksheet to utilize before pulling the trigger on a buy.
Yes making sense Markus. Good pace for me anyway.
Cool! Do you use the PowerX Optimizer software?
Excellent presentation! Thanks
Hi Tony VA USA, thanks for watching. And thanks for your feedback. Much appreciated. "See you" in the next video 👍
This is the best explanation video on RUclips. Thank you sir
You are welcome! I am glad that this helps! :)
Yes yes yes!! Very easy to understand when you make it this simple!! Thank you
You are welcome! :)
In the last two columns should the max risk not be difference between strikes *100 MINUS the premium received. You have not mentioned Minus Prem received and I was wondering if you missed it or my understanding is flawed (most probably it is the latter)
Excellent video, I'd been looking for something like this for a while, thank you!
I am glad that you like this! ;)
Great video! Thanks.
So what is your favorite spread?
Great video really helps. Watched you on Benzinga this morning and looking forward to browsing all your other videos!
Hi Darrin, thanks! Have you seen my latest video on the "PowerX Strategy": ruclips.net/video/6C_ac36iXMw/видео.html
I did it yesterday, and I think you're going to like it. 👍
Wao such an awsome explanation. Auto subscribed. Thanks for the content.
Awesome! Than you!
Markus this s/s is exactly what I needed to see I will study this further. thx I subscribed and like have a blessed day
I'm glad to hear it! I love to hear it when someone gets something from these videos! I'll see you on the next one, and have a Great 2021 my friend!
Great video. Thank you
Awesome! Thank you for watching! ;) If you are interested to get the PowerX Optimizer you may get it here bit.ly/441OPel and apply the promo code "Rockwellspecial".
Great video!!!
Awesome! Thank you for watching! :)
nicely done!
Thank you for watching! :)
Best tutorials comparing all options spreads. Thanks
😊 You are welcome! I am glad that this helps!
Yes, making sense.
Great explanation
Thank you! ;)
I actually meant that I have Jan 2023 leaps and I want to sell short calls against them monthly just to make some money during the next year and a half. I don't know how the brokerage handles if the short call I wrote gets exercised and I only have the leaps to cover it. For example, I bought leaps at $52.50 now they are $71. Lets say I write call , stock goes up ( my leap goes up to lets say $75 ) and the call I wrote gets exercised and brokerage sells my leap at $75 to cover it. Do I lose the profit from $52 to $75 or just from $71 to $75 ?
After watching so many videos. Now it makes sense. Thank you so much!
Hi Jay Dumas, thanks for watching. And thanks for your feedback. Much appreciated. "See you" in the next video 👍
The spreadsheet is very useful. You should put that on your link.
I am glad that you find it useful! ;)