HomeХобби и стильRelated VideosMore From: Option Alpha

Bear Call Spread Option Strategy

257 ratings | 51020 views
http://optionalpha.com - How to set up and trade the Bear Call Spread Option Strategy. ================== Listen to our #1 rated investing podcast on iTunes: http://optionalpha.com/podcast ================== Download a free copy of the "The Ultimate Options Strategy Guide": http://optionalpha.com/ebook ================== Still working a day job? Then our "Take 5" segment is for you. 5 mins videos each day on 1 thing you can apply trading options: http://www.youtube.com/playlist?list=PLhKnvfWKsu40z0EnsX0TNqCgUzb8tmM04 ================== Start our 4-part video course (HINT: these videos are NOT posted anywhere else online): http://optionalpha.com/free-options-trading-course ================== Just getting started or new to options trading? Here's a quick resource page we made that you'll love: http://optionalpha.com/start-here ================== Register for one of our 5-star reviewed webinars: http://optionalpha.com/webinars ================== - Kirk & The Option Alpha Team
Html code for embedding videos on your blog
Text Comments (20)
Mills and sons (2 years ago)
Is a spread one order? or two separate orders?.. my platform doesn't give you the option to execute spreads.. does it matter if i execute separately?
Option Alpha (2 years ago)
You can place it as one order typically with two "legs"
Paulo Justiniano (3 years ago)
How far out of the money should you sell and buy?? Someone told me that the farther otm you are the better it is since you want to make sure the stock never reaches or passes that price... ?? exp -  if the QQQ are trading at 13.54  and the highest of all time was 114. You should sell the 117 and buy the 118 or even much more  farther out of the money since its unlikely the stock will rich that price. ( 30day) What do you think about this??? should you sell and buy very far out of the money or should you do it at the money  or at least closer to the money??? Thank you for your videos I am going to sign up with you guys very soon.
Option Alpha (3 years ago)
+Paulo Justiniano It doesn't matter because the market is far and efficient. If you sell further out you'll win more often but when you win you'll get less money. If you sell closer you'll win less often but when you do you'll get more money. The only key is that you should be a net seller most of the time when trading options.
Corbin White (4 years ago)
hey kirk i am wondering how this affects margin because if you get assigned then you will be long 100 shares from the 1 short contract and then you will exercise your long call in this example i understand your losses are capped
Option Alpha (4 years ago)
+Corbin White I would only require the full amount to cover the stock if you held the position the next day. If you exercise your long option and cancel out the shares you are fine.
I want to know why would buying a second call option (during volatile upmove) would make the trade profitable. Won't writing the call option would mount more loss? Besides what would be the margin requirement of writing the call and the stock moves higher and higher.
CatMan DO (4 years ago)
I am new to Option trading. Once my position reaches max profitability, can I get out of it before expiration?
Option Alpha (4 years ago)
Yep! you can buy back the spread and close the position.
c356 (4 years ago)
Kirk, thanks for the videos.  Keep them going!  Please upload more strategies!!
Jeff Kloth (4 years ago)
Makes no sense. If your goal is to have the stock go down why would you do this instead of a put. You would sell your stock if it gets assigned at $37 since you are doing a call option (which means you are selling your stock at $37) and you would lose money on the 40 call. You would still keep your credit but would have an overall loss. Also if the stock goes above $40 you would make more of a profit (your 37 call you wrote would still keep the credit and not be assigned) and your $40 call would get profit as the stock continues to rise. 
Option Alpha (4 years ago)
If you buy a put option it would cost much more AND your break-even would be lower. If the bought the $37 put for example it could cost $2.00 or more meaning you really need the stock below $35 to start to break-even. This is a much higher probability of success trade.
Dave Mewborn (5 years ago)
I dont understand what is the implication if the stock ends up above the OTM call strike. Say, it ended up at 45 upon expiration. Wouldnt that change your maximum loss to greater tha $300? Thanks for the help
Dave Mewborn (5 years ago)
Thanks for answering.
Option Alpha (5 years ago)
Nope - the max loss is the difference in strike prices $5.00 less the $2.00 credit so $3.00 or $300 per spread.
Aleks (5 years ago)
why risk more ($300) to potentially make less ($200)?
Option Alpha (5 years ago)
+Alexander Levit Yes short OTM puts are better plays ONLY during high IV. Calls generally the same yet they have less overall premium because when markets go higher they generally are during periods of low IV.
Aleks (5 years ago)
Shorts(puts) Prob of ITM or hitting has a much larger % of happening+time decay is on your side?...The reverse applies to Calls(Longs)? Thank you
Option Alpha (5 years ago)
Because the probability of making or losing money makes the trade worth wild. For example, if you make a trade that nets a $30 credit and your are risking $70 but the chance of making the $30 is 60-70% then you should make that trade all day. Hope this helps!
irvin arce (5 years ago)
thank you very much for your help understanding this strategy. I have a question, to sell a call we must own the underlying stock unless you have level 5 or the authority to write naked contracts, how do you protect your stock position from the loss the benefits the option strategy?

Would you like to comment?

Join YouTube for a free account, or sign in if you are already a member.