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Options Trading Strategies - Bear Call Spreads - Volatility, VIX, Investing

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Going over one of my favorite and most common options trading strategies there is, the Bear Call Spread. Take control of your financial future ! Visit my website: http://volatilitytradingstrategies.com/ Claim your FREE 2 Week Trial: https://www.volatilitytradingstrategies.com/subscribe Enjoy my Blog: https://www.volatilitytradingstrategies.com/blog Twitter: https://twitter.com/VolatilityVIX ...
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Text Comments (12)
boom1111111111111111 (7 months ago)
How is this preferable to buying a put?
Money Talk (7 months ago)
Great question! I wrote a daily blog on that exact topic here: http://volatilitytradingstrategies.com/index.php/2018/08/17/34206/ It has to do with the different risk reward profile of put spreads vs puts. If you look in my recent video the premium for that put spread was 0.61$ but on that same day the 9$ put was about 1.30. That means that in order for the put to break even at expiration UVXY has to get all the way to 7.70, and to make any significant money it has to get into the mid 6's. The put spread though makes or loses all it's money in just a 1$ spread, from 9 at full loss to 8 for full gain. So put spreads that are based on waiting for expiration don't require the UVXY to decay very much to make the profit, but long puts require a huge down move. They can definitely make a lot more money but it takes a far larger move to get that profit. For options that are open ended I prefer long puts. For options based on waiting for expiration I much prefer put spreads.
David Lincoln (9 months ago)
Great. .We need more!!
James Bradley (9 months ago)
The videos are an excellent addition.
Simon Tse (9 months ago)
One question. I noticed the differences in the strike prices of your SPX Spread is $20 or roughly 0.7% (2780/2800). Is there a reason why you chose this? Do you use a percentage for your strike prices on Spread?
Money Talk (9 months ago)
Well trading is relative and personal so I can only speak on myself, but I don't feel the need to take on risk because my goal is always long-term outperformance and I've been doing that for so many years there's no point in changing the formula just to take some unnecessary risks. But I never tell other people what to do so if you found a way to make it work for you than that's fine. Also though, if you're in the habit of trading long puts and calls you'll have some 50 or 100% gains, occasionally more. The only thing that matters though is long-term consistency and when you add in all the losing trades I seriously doubt it's up very much money. It's human nature to only remember the winners but for anybody who keeps an accurate trade log they quickly realize it's a losing battle in the long run. It's no different than gambling. If you ask a random person in Las Vegas how they do at the tables they will usually say very well. They will say they are up money long term and will quickly tell you stories of all the big winners. But we know for a mathematical fact that the odds are against them and most lose. It's just human nature to embellish the wins and minimize the losses. If it's written down, there's very few winners in Vegas and there's very few winners trading long puts and calls. So if the accurate trade log says it's profitable long-term for the risk you're taking on then go for it. For me I've not found that the case. Many losers, a few winners. I don't like the risk reward dynamic, but to each his own :)
Simon Tse (9 months ago)
Brent. Why don’t you buy single options? I know there’s the risk factor but if you are correct, the trade can be very profitable. Once a while we gotta take some risks. I love your system for the long run, but risks are a part of not only the stock market, but also in life in general. Last week, I bought single outs on JPM and XOM, I closed out 60% of those trade with triple digit gains. I’m holding the rest for further potential gains next week. Maybe there’s too much of a John Wayne in way.
Money Talk (9 months ago)
I don't ever do that no. When I open a spread I trade it like one until expiry. There's only a very specific trade type that I keep rolling one of the strikes. I'll be introducing that strategy as soon as we get some really low volatility. Maybe next week but basically I feel that closing one of the strikes and leaving the other open is far too directional for my liking. Being short a Bear Call Spread like we are can profit if markets go down or just stay where they are because it is Theta positive we're at right now. But just keeping that call open, that's a terrible probability trade. Think of it this way. Would you buy that 2800 call on it's own right now? if the answer is yes then maybe you have a point. For me personally my answer is absolutely not. I don't buy individual calls or puts. So why would I do it just because I have a spread open? I only take trades that I would take as brand new trades. A long call is a low probability trade, no thanks :)
Simon Tse (9 months ago)
Money Talk great tip. Thanks. Another thing, you mentioned in your video that we may need the trade if spx hits 2790. Can we end only one half of the trade (the sell 2780 call) and keep the buy 2800 call since it’s working in our favor, although it would still be a bit out of the money?
Money Talk (9 months ago)
No specific rules, I just make sure there's plenty of volume on the strikes that I trade so the execution prices are smooth. Also you can check the "product depth" in the ThinkorSwim platform and it will visually show you the implied volatility of every strike. So in this case you'd want to make sure you're selling the strikes with a peak higher in implied volatility and buying anything that is lower. When I opened the trade the 2780 IV was elevated and the 2800 was depressed so it made sense for this one. But I do check it every trade. I may be a small difference but with options trading sometimes just managing high and low points in IV coupled with reducing trade fees already makes you profitable. Then adding in your knowledge edge and it can add up to significant long-term gains. Every little bit counts :)
NavShay (9 months ago)
Beautiful British Columbia, the best place on earth! Enjoy the wonderful summer of Vancouver Brent. I sure miss it...
Simon Tse (9 months ago)
Great explanation Brent. Short and to the point. You have great success rates with your options trades. I for one, would like to see more options trades. If other subscribers agree with you, please give this comment a thumbs up.

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