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Trading Vertical Debit Spreads | Options Trading Concepts

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Vertical debit spreads can be a great way to place a smaller directional trade in much larger underlyings. Learn how @doughTraderMike sets up his vertical debit spreads for the best chance of success! New to options trading? Mike breaks down trading strategies and concepts in a visual way for beginner to intermediate investors. Click the link below to learn more: http://ow.ly/10CPwt Follow: @doughTraderMike Use the hashtag #whiteboard to discover more options trading concepts! ======== tastytrade.com ======== Finally a financial network for traders, built by traders. Hosted by Tom Sosnoff and Tony Battista, tastytrade is a real financial network with 8 hours of live programming five days a week during market hours. From pop culture to advanced investment strategies, tastytrade has a broad spectrum of content for viewers of all kinds! Tune in and learn how to trade options successfully and make the most of your investments! Watch tastytrade LIVE daily Monday-Friday 7am-3:30pmCT: 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 Pinterest: http://www.pinterest.com/tastytrade/
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Text Comments (20)
Kurtie7 (26 days ago)
Thank you, Mike..
DAGenao (4 months ago)
Hi Mike, at 10:50 you said when you sell a Put you want the shares to go down in price. Actually, when you sell a Put you expect the price to stay the same or rise. Did I get something wrong?
tastytrade (3 months ago)
That section is in reference to a long put spread, which is a bearish trade. The long option will have a higher delta than the short, so you'd want the spread to go fully ITM to reach max profit at expiration, meaning you want the stock price to go down. You are correct in saying that when you SELL a put, you want the stock price to rise or stay the same.
Lou Bob (5 months ago)
If the POP for the put debit spread is 54% of making 1 cent, then is there only a 46% chance of losing 1 cent? Since you can calculate the P50, then why can't you calculate P25, P75, P100?
Cass2kX1 (6 months ago)
Why are* ITM/ITM and OTM/OTM debit spreads bad?
Tam Tran (8 months ago)
Best debit spreads explanation! Thanks
Pat Fale (1 year ago)
great info ---you should try a different hair style--bangs perhaps
Mae Louise Lee (4 months ago)
Terri Breed (1 year ago)
Another great explanation. Answers so many questions I was wondering about including when to employ this strategy.
Lorbeer Investment (1 year ago)
Very straight forward and comprehensive! I must say as well that Mike totally rock these lessons, very fluent explanation from beginning to the end, this shows he really knew his sh... Well done sirs!
tastytrade (1 year ago)
Thank you! Glad you enjoyed it!
Geez I read that as mike and his water board, lol
richy r (1 year ago)
So for example if I buy a vertical spread I pay 100 dollars for the spread my max! Profit is 200 I decide to sell at 200 do I keep the 100 I also invest it making a 300 dollar profit. Or do I lose the 100 I paid for the spread. Please let me know I have called TD and I have got 2 different answers some say yes some say no please help thanks.. 🙏🏽
richy r (1 year ago)
Thank you very much I will try it again.
tastytrade (1 year ago)
If you bought a vertical spread for $1.00 and your max profit is $2.00, that would mean you have a 3 point wide spread. If you sell it for $3.00, then yes you would profit $2.00 and get back your $1.00 you paid at entry. However, if you sold it for $2.00 like you said, you would only profit $1.00 as you paid $1.00 on entry and only sold it for $2.00. I hope this helps!
Joseph Lewis (1 year ago)
Great video! I like how you were able to set the put debit spread. Are put debit spreads a better vehicle for the set up then call debit spreads? If I have 100 free trades could I profit 25$ on this type of set up repeatedly?
tastytrade (1 year ago)
Thanks for tuning in! Not necessarily - put and call debit spreads are generally 50/50 shots that we use in low IV environments or to get a taste of larger priced underlyings that we can't afford to trade with naked options. It's hard to say if you could be consistently profitable - it would take a lot of directionally correct trades, which is something we try to avoid, as we don't know where the market is going!
warever37 (2 years ago)
Good info... bad advice... how on earth a 50% POP is a "good" trade? it's a coin flip!
Greg Keen (17 days ago)
I know this question is a couple years old at this point, but this type of trade assumes a directional bias. In this case we're assuming the price of the underlying stock will increase in value during the life of the option. This is a bullish bias. If the stock goes up, you win, if it goes down you can lose, but all of these option positions can be adjusted during duration of the trade. If it begins to go against you, you simply buy it back.
purplejesus28 (5 months ago)
garand (10 months ago)
worked for me. 110/6

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