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Basic Strategies - Vertical Call Spreads | Trading for Newbies

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Our first basic strategy, the vertical call spread On this episode of Trading For Newbies, Ryan and Beef explain both buying and selling vertical call spreads. A vertical call spread is created by simultaneously buying and selling two different call options at the same time. The action we take (whether we buy or sell) with the front option determines the direction of the trade, whether it's a bullish or bearish trade. A long or short call spread works in exactly the same way as a long or short call option, but the spread has some interesting benefits compared to just buying or selling an option. If you're interested in learning more about calls, make sure to check out our previous lesson on calls. Episode Contents: Buying A Call Spread Selling A Call Spread About Trading For Newbies This series will educate you, the beginning trader on the basics of options trading and the tastytrade approach to trading. Our goal is to get you to the point where you will be able to actively find opportunities in the market, enter and exit trades, and clearly articulate what you are doing throughout the process. ======== tastytrade.com ======== tastytrade is a real financial network, producing 8 hours of live programming every weekday, Monday - Friday. Follow along as our experts navigate the markets, provide actionable trading insights, and teach you how to trade. With over 50 original segments, and over 20 personalities, we’ll help you take your trading to the next level, whether you are new to trading or a seasoned veteran. http://ow.ly/EbzUU Subscribe to our YouTube channel: https://www.youtube.com/user/tastytrade1?sub_confirmation=1 Follow tastytrade: Twitter: https://twitter.com/tastytrade Facebook: https://www.facebook.com/tastytrade LinkedIn: http://www.linkedin.com/company/tastytrade Instagram: http://instagram.com/tastytrade
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Text Comments (23)
Steve Friedlander (1 month ago)
How do decide if you’re negative on a stock, to either sell Call spread or buy a Put spread?
Steve Friedlander (1 month ago)
Can I assume the opposite when Bullish?
Steve Friedlander (1 month ago)
tastytrade Perfect!!
tastytrade (1 month ago)
short call spreads OTM typically have lower profit potential, but more space to be correct and higher probability of success. Long put spreads typically have a higher profit potential, but lower probability of success. Totally up to you, but that's the tradeoff for the most part.
Blues Man 63 (1 month ago)
How do I exit? How do I sell a call spread or buy a put spread?
tastytrade (1 month ago)
To exit a trade, you can just route the opposite order. For example if you buy a call spread, to close it you would SELL the same exact call spread, with the same strikes and expiration. This would close the trade.
jsherman385 (3 months ago)
I am looking a TLRY for a call spread that is bullish. What would your opinion be? Thanks I really like the Ryan and Beef options for newbies
tastytrade (3 months ago)
Totally up to you! We like to ensure that we're aware of the extrinsic value in the long option, and we sell an option against it that covers that extrinsic value or more. This removes all of the negative decay effect on the long option, and can put us into a positive theta decay scenario.
jsherman385 (3 months ago)
have you ever been assigned the underlying stock?
tastytrade (3 months ago)
Yep! It does happen, but it's very rare. With spreads though, the risk doesn't change. The long option protects the short option as long as we own it.
LAWRENCE NSOBYA (4 months ago)
You guys are great
zaasc sadc (7 months ago)
If you are trading more winners than losers why on earth would you want to limit your upside potential? You are losing expected value and still have the exact same downside risk. This strategy is good if you cant manage a trade or want to run a bot with this script and get the maximum number of trades to get as close as possible to expected value.
Jose Garcia (2 months ago)
you are 100% wrong
DIVYA CS (8 months ago)
You guys really love what u r teaching. Full of excitement and energy. Thanks
apb38 (8 months ago)
Great video. I saw that the trade was for like 71 days. I was hoping you'd give an example if it was just 2 or 3 weeks.
iZomB-6 (9 months ago)
Question if you sell a Put let’s say at $150 and At expiration you buy it back for $140 do you own those shares ?
Jose Garcia (2 months ago)
at expiration you collect the premium...you wont own stock unless you are assigned and if that happens you can sell it later on
dheeraj chidambaranathan (10 months ago)
Hi, What happens at expiration? How do we close the trade at expiration or near expiration or does the sell call cancel the buy call?
Jose Garcia (2 months ago)
time decay..it will expire worthless at expiration and you collect the premium..you win
AprilCherry (1 year ago)
For the buying call spread, if apple price is above 175/180 at expiration is this trade still profitable? Will you get assigned the stock?
shadowpenguin93 (8 months ago)
You would receive full profit
T3ch Wali (9 months ago)
AprilCherry same question I had… what happens if you get assigned?
Conor Carroll (1 year ago)
You guys are awesome!

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