Wow! I didn't know you could turn the trade into a vertical bull put days later in order to protect yourself and still make a profit or lower your losses. I thought you had to make those kind of Trades from the beginning. I wish I knew this months ago thank you. Good idea!
Great video on Credit spreads. Just curious. If we are assuming the stock is going to have a bearish/neutral trend and profit from the downward movement of the price, why not SELL the ITM call and BUY the OTM call? We will have a good credit and we don't need to worry about closing or rolling the spread. Any thoughts? Also, what is your thoughts on selecting the strike prices that are closer to 2 STD.
+orkayen Thanks for the comment. Yep. You can do ITM calls if the stock is very bearish, sure. OTM options simply have a higher percentage of expiring worthless, that's all. You are correct. You make much more money on the spread with options closer to 2STD or options that are ITM. But.. they simply have more risk. More risk, more reward right? If you're analysis is spot on, the trade can work! What's your experience with these set ups? : _)
Thanks for the feedback. I am just getting into it and yet to make a trade on the spreads. Further to your clarification, let us say, I bought a bear call spread on AAPL today with $88 ITM SELL call and $99 OTM buy call with around $550 credit. The stock is trading at $93. 4/6 is expiration. If AAPL trades at $97 by 4pm EST on 4/6, what is my risk? The ITM call will still be ITM but the contract will be expired. Do I obligated to buy it before expiration at $88? Is this the reason we always go for OTM?
You can also email these questions if it's easier and that way I can send you charts. :) jerremy@reallifetrading.com In this situation, Your max risk is the spread. $99-$88 - $1,100 loss for the spread per contract. Your max gain is the $550 you make per contract. If the option expired in the money, your broker would auto exercise the option and you would sell short shares of AAPL at $88 in value.
So a spread basically works like going long on a stock at $50 for instance, and having a sell short buy limit at $48 in case it goes against you? Except you’re also collecting premium?
If my option gets exercised and I have to pay up on the risk that I knew was there, do I now own the stock of the number of shares that I just bought? For example, if I had 100 contracts of a naked put on the 36.00 fitbit (example in the video around 30:00 min in) and there is a $36,000 margin risk If the stock drops at the date of termination and I have to pay up the $36k, do I now own $36000 in fitbit shares at the 36.00 strikeprice? Could I then just wait and hope fitbit increases again to 36.00 and sell and get all of that money back? If so, the risk does not seem all that risky. Because you can surely make some of that back in a sale of the stock.
Alex Horn Yep. You pretty much nailed it! Except you don't 'buy the put' you sell it. Otherwise, you nailed it. That's why I don't sell puts with TOO much expiration.. =]
+Jason King +Solid question. No, not really. I just like those stocks. SPY, IWM, DIA, QQQ are only $1.00 spread. Weeklies on AAPL, TSLA, NFLX can be $2.50 as well. Let me know if this helps! :)
great videos credit spreads are some nice plays. Do you have any video lessons on debit spreads? I think debit spreads are awesome and great for people with low income and they can make a small move and still make you 100% plus ROI.
Dylan Langley I have some articles and videos, yes. reallifetrading.com/search/Bull%20Call%20spread reallifetrading.com/articles/5-points-bear-put-spread ruclips.net/video/RvFK6x60bBo/видео.html Enjoy!
Excellent overall. Could have used a bit better screen typing methodology,but, most was eventually visible. I would suggest speaking a little bit more slowly and give the strike prices at each option selection. That was a confusing issue at the beginning of the video. Still, I think this is the best YT video I have seen on the subject.
+Leonardo DaVinci Thank you for the feedback. If you have any additional questions you're welcome to email me as well! Jerremy@reallifetrading.com I do have 2-3 other videos out there about spreads also. You rock
do you have to close your position on expiration day even if out of the money or only if its in the money to avoid assignment? if you do not close the position you keep 100% premium?
how long would it take to get to this level? dont u have to do calls and puts first for a few months before they even let you do spreads? I might be wiped out by then with no protection from the other side
Well, credit spreads 'do' have protection, right? It's a limited risk / limited return strategy. But yes, brokers do require 2-3 years (at least I believe) of knowledge to trade credit spreads in an account. However, this can depend on the broker. There isn't any 'test' that you have to pass or background check or anything - to make sure you know what you're doing. But yeah... if you put you have they experience, they will give you access. {Which agreed, I don't recommend. Definitely try it before you buy it type of deal}.
Go right to credit spreads. You will not be wiped out if you are far enough out of the money. Go minimum 30 days and up to 100 days. The further out in time you go, the more premium you can collect because the longer you have to wait. But also the further out of the money you can get. I subscribe to Lee Finberg - Safer Trader and also bought his book. And no I do not work for him. The key is to be so far away from any action that the market will have a hard time coming close to your position. It is a slow steady earner. It is not exciting but it does work. Started in September 2016 and so far have 11 wins out of 11. If you don't feel comfortable doing spreads then you don't understand options and need to do some more research and maybe a demo account for a bit.
Just an update - this is an email I got from a Real Life Trader. He sent me an email. :) This is a list of spreads he placed on 11/19/15. " GOOGL BPS 752.50/747.50 for .38 or 7.6% AMZN BPS 657.50/652.50 for .49 or 9.8% AAPL BPS 118/117 for .10 or 10% BIDU 200/205 for .47 or 9.4% I will be watching these overnight at the market close and open to make sure things keep moving my direction. I have closed some of these early for a smaller profit but if I don't trade over earnings they have been highly successful. I am making the money on the diminishing time value."
Karriann Graf Ph my goodness, absolutely. That's the most important part about spreads. I cover that in session 2. ruclips.net/video/akhATyOd3_g/видео.html If you have any other questions, let me know! Thanks! : )
David McClain only for directional options. Not for credit spreads (at least not yet) But I do have an amazing afternoon swing trading room you would likely enjoy =]
@@RealLifeTrading After revisiting this I think I have been missing out. I am just now realizing just how powerful this strategy is. Great video it is helping me out years later from when I first watched it lol. I would say I'm going to give this a try and see how things work out. Thanks again for the awesome videos. 💯
@@dylan833-k2i Yeah man. It's legit. Watch this video to get FIRED UP. ruclips.net/video/n8_17UKhODs/видео.html Credit spreads are 80% of what Tony does to make a living trading. :)
bear calls and bull puts make sense do them otm and cheap ..bull calls and bear puts are too expensive u risk being called away ..should teach people iron condors and closing out trades when the strock get dangerously close to the spread strikes...gotta roll up and roll down as well WEEKLYS are the best (y)
Your Ask - Bid definition is wrong! The ask price is the maximum price that a buyer is willing to pay. The bid price is the minimum price that a seller is willing to receive.
Sorry the way around! The Bid price is the maximum price that a BUYER is willing to pay. The ASK price is the minimum price that a SELLER is willing to receive.
Wow! I didn't know you could turn the trade into a vertical bull put days later in order to protect yourself and still make a profit or lower your losses. I thought you had to make those kind of Trades from the beginning. I wish I knew this months ago thank you. Good idea!
YEAH!!! :-)
Thanks for watching!
I'll have to watch this several times...it's a challenge to overcome the learning curve.
always coming back to the "BASICS". I love these vids. RLT for life
Thanks for the comment
I will try out this Strategy. But how do I actually find Support and resistance lines?
Ah. That part is easy!! :-) Go through some of my beginner classes and just get some practice with it!
@@RealLifeTrading thanks for the answer :) Guess they are on RUclips?
great ,you can understand easily with his videos
+tinchu sharma Thanks!
Great video on Credit spreads. Just curious. If we are assuming the stock is going to have a bearish/neutral trend and profit from the downward movement of the price, why not SELL the ITM call and BUY the OTM call? We will have a good credit and we don't need to worry about closing or rolling the spread. Any thoughts? Also, what is your thoughts on selecting the strike prices that are closer to 2 STD.
+orkayen Thanks for the comment. Yep. You can do ITM calls if the stock is very bearish, sure. OTM options simply have a higher percentage of expiring worthless, that's all. You are correct. You make much more money on the spread with options closer to 2STD or options that are ITM. But.. they simply have more risk. More risk, more reward right? If you're analysis is spot on, the trade can work! What's your experience with these set ups? : _)
Thanks for the feedback. I am just getting into it and yet to make a trade on the spreads. Further to your clarification, let us say, I bought a bear call spread on AAPL today with $88 ITM SELL call and $99 OTM buy call with around $550 credit. The stock is trading at $93. 4/6 is expiration. If AAPL trades at $97 by 4pm EST on 4/6, what is my risk? The ITM call will still be ITM but the contract will be expired. Do I obligated to buy it before expiration at $88? Is this the reason we always go for OTM?
You can also email these questions if it's easier and that way I can send you charts. :) jerremy@reallifetrading.com In this situation, Your max risk is the spread. $99-$88 - $1,100 loss for the spread per contract. Your max gain is the $550 you make per contract. If the option expired in the money, your broker would auto exercise the option and you would sell short shares of AAPL at $88 in value.
So a spread basically works like going long on a stock at $50 for instance, and having a sell short buy limit at $48 in case it goes against you? Except you’re also collecting premium?
Vinny vidi vici Kind of...? More or less, you make money if the stock DOESNT go near the option / price / strike you sell
Thank you Jerremy 🙂
You bet
Excellent teacher...love your vids man! Keep up the great work!
Thanks for commenting
If my option gets exercised and I have to pay up on the risk that I knew was there, do I now own the stock of the number of shares that I just bought? For example, if I had 100 contracts of a naked put on the 36.00 fitbit (example in the video around 30:00 min in) and there is a $36,000 margin risk If the stock drops at the date of termination and I have to pay up the $36k, do I now own $36000 in fitbit shares at the 36.00 strikeprice? Could I then just wait and hope fitbit increases again to 36.00 and sell and get all of that money back? If so, the risk does not seem all that risky. Because you can surely make some of that back in a sale of the stock.
Alex Horn Yep. You pretty much nailed it! Except you don't 'buy the put' you sell it. Otherwise, you nailed it. That's why I don't sell puts with TOO much expiration.. =]
Is there a reason why you commonly use a $5 wide spread vs. something less?
+Jason King +Solid question. No, not really. I just like those stocks. SPY, IWM, DIA, QQQ are only $1.00 spread. Weeklies on AAPL, TSLA, NFLX can be $2.50 as well. Let me know if this helps! :)
great videos credit spreads are some nice plays. Do you have any video lessons on debit spreads? I think debit spreads are awesome and great for people with low income and they can make a small move and still make you 100% plus ROI.
Dylan Langley I have some articles and videos, yes. reallifetrading.com/search/Bull%20Call%20spread
reallifetrading.com/articles/5-points-bear-put-spread
ruclips.net/video/RvFK6x60bBo/видео.html
Enjoy!
Excellent overall. Could have used a bit better screen typing methodology,but, most was eventually visible. I would suggest speaking a little bit more slowly and give the strike prices at each option selection. That was a confusing issue at the beginning of the video. Still, I think this is the best YT video I have seen on the subject.
+Leonardo DaVinci Thank you for the feedback. If you have any additional questions you're welcome to email me as well! Jerremy@reallifetrading.com I do have 2-3 other videos out there about spreads also. You rock
do you have to close your position on expiration day even if out of the money or only if its in the money to avoid assignment? if you do not close the position you keep 100% premium?
bob dole nope. If it is out of the money, just let it stay that way and it will expire worthless and go to options heaven.
Real Life Trading ok good :) thx
bob dole I hope some are expiring worthless for you tomorrow buddy. ;)
how long would it take to get to this level? dont u have to do calls and puts first for a few months before they even let you do spreads? I might be wiped out by then with no protection from the other side
Well, credit spreads 'do' have protection, right? It's a limited risk / limited return strategy. But yes, brokers do require 2-3 years (at least I believe) of knowledge to trade credit spreads in an account. However, this can depend on the broker. There isn't any 'test' that you have to pass or background check or anything - to make sure you know what you're doing. But yeah... if you put you have they experience, they will give you access. {Which agreed, I don't recommend. Definitely try it before you buy it type of deal}.
Go right to credit spreads. You will not be wiped out if you are far enough out of the money. Go minimum 30 days and up to 100 days. The further out in time you go, the more premium you can collect because the longer you have to wait. But also the further out of the money you can get. I subscribe to Lee Finberg - Safer Trader and also bought his book. And no I do not work for him. The key is to be so far away from any action that the market will have a hard time coming close to your position. It is a slow steady earner. It is not exciting but it does work. Started in September 2016 and so far have 11 wins out of 11. If you don't feel comfortable doing spreads then you don't understand options and need to do some more research and maybe a demo account for a bit.
I'm only at 25:54 and I have learned how to play the spread!
David Rocha Yes!!
Just an update - this is an email I got from a Real Life Trader. He sent me an email. :) This is a list of spreads he placed on 11/19/15.
"
GOOGL BPS 752.50/747.50 for .38 or 7.6%
AMZN BPS 657.50/652.50 for .49 or 9.8%
AAPL BPS 118/117 for .10 or 10%
BIDU 200/205 for .47 or 9.4%
I will be watching these overnight at the market close and open to make sure things keep moving my direction. I have closed some of these early for a smaller profit but if I don't trade over earnings they have been highly successful. I am making the money on the diminishing time value."
I'm watching I sure hope you talk about stop losses on these spreads.
Karriann Graf Ph my goodness, absolutely. That's the most important part about spreads. I cover that in session 2. ruclips.net/video/akhATyOd3_g/видео.html If you have any other questions, let me know! Thanks! : )
Real Life Trading Love your attitude Jerremy.... keep it up :D
Karriann Graf THANKS!
is it possible to place a bull put spread on the 'Nadex' platform?
+Jarrod Olson Yes, but I don't trade binary options so I am not sure how to do it.
Excellent video .....! Thank you.
Francisco Javier Ruiz wonderful!!!
Thank you so much, great explanation, really appreciated your sharing wholeheartedly :))
My pleasure. Thanks for your kind comment. If you have any other questions, let me know! :)
Instead of waiting until Wednesday to sell spreads why not just sell SPY spreads or iron condors since it trades about every other day?
thanks for the comment
Beautiful lesson man! Thank you!
Mauricio Moreno My pleasure!
And all I know about the candles You burn them ? I need to start at the Beginning
Can you make money ?
Zdenek Selepa yep!! I personally think they are very relevant in trading. Here's a free E-book on them! reallifetrading.com/free-products/candlesticks
Zdenek Selepa yep!! I personally think they are very relevant in trading. Here's a free E-book on them! reallifetrading.com/free-products/candlesticks
HEY JERREMY.. DO YOU HAVE A SIGNALS SERVICE?
David McClain only for directional options.
Not for credit spreads (at least not yet)
But I do have an amazing afternoon swing trading room you would likely enjoy =]
Coming back dude!
OHHH YEAH!!!!
Thanks for commenting
Thank you for your video
Thanks, Rayrene! Glad you enjoyed!!
rayrene Thank you for watching!
What is your favorite kind of option spread?
Bull put spread.
@@RealLifeTrading After revisiting this I think I have been missing out. I am just now realizing just how powerful this strategy is. Great video it is helping me out years later from when I first watched it lol. I would say I'm going to give this a try and see how things work out. Thanks again for the awesome videos. 💯
@@dylan833-k2i Yeah man. It's legit. Watch this video to get FIRED UP. ruclips.net/video/n8_17UKhODs/видео.html Credit spreads are 80% of what Tony does to make a living trading. :)
bear calls and bull puts make sense do them otm and cheap ..bull calls and bear puts are too expensive u risk being called away ..should teach people iron condors and closing out trades when the strock get dangerously close to the spread strikes...gotta roll up and roll down as well WEEKLYS are the best (y)
forgot the thumbs up dont work here lol
Thanks for the kind comments!! Yep, I do teach those / that in this class ruclips.net/video/DhuRZFQFejA/видео.html and also in session 2. :)
Nice class
Mircea Stanciu thank you very much!! :-)
Also be careful and mindful about assignment risks on credit spreads
:
Your Ask - Bid definition is wrong! The ask price is the maximum price that a buyer is willing to pay. The bid price is the minimum price that a seller is willing to receive.
Geesshh... what planet are on on?
Thanks for commenting
Thanks 😊
thanks for watching
Sorry the way around! The Bid price is the maximum price that a BUYER is willing to pay. The ASK price is the minimum price that a SELLER is willing to receive.
Thanks for commenting
Trying to come back...
Thanks for commenting
5000
😀