Debit Spreads Explained | Simpler Trading Tips

In this video, Allison breaks down the value of the debit vertical spread and how it relates to risk management in options trading. Discover how using this technique allows you to trade expensive symbols for a fraction of the cost!

0:00 Introduction
0:12 What Are Vertical Spreads?
1:03 What Is A Debit Spread?
1:24 How Risk Is Calculated On A Debit Spread
1:45 Examples of Debit Spreads

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Allison’s goal is to help traders minimize the downs, so their ups can outshine in their account. As the Director of Risk Tolerance at Simpler, Allison is able to explain complex trading strategies and chart patterns with ease for both beginners and advanced traders. Her unique view of how to look at Capital Risk, the Chart, and the Option Chain can give any trader a new perspective on investing. For those who have trouble with position sizing, chart reading, or options trading, Allison’s Recycling Risk sessions are a “must watch.”

Ready to learn about all the opportunities in the finer details of a trade?

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Why trade alone when you can access over 100 years of trading experience right at your fingertips? Simple strategies, proven tools, real-time alerts, and an interactive trading community await. Keep it simpler with Simpler Trading.

#Debitspreads #Options #Verticalspread

[martin]

i have been using these for the last few weeks with encouraging results. I have a question. How do you determine the best expiration dates (I only use stocks not indexes)? If the date is too far in the future, the short call and long call are too close in value generally capping profits less than the max. I have been doing about 10 days out usually, but have not taken one to expiration to see how it handles.

[darrellwillie]

Bought not bot. Just a suggestion. Thank you for the great content and explanation of the spreads.

[reyultra]

Hey great video thanks!

I was wondering why a debit spread would remain the same price even though the underlying stock price is going in the direction desired?

[gp]

I just started to use debit spreads, so are they familiar with credit spreads where you get max profit at expiration?

My first mistake with a debit spread the first time was opening a few ITM, needless to say I got assigned and I was confused as to why, obviously it was because they were ITM and the stock had gone my way.

So if I say that X stock will not touch say $20 by X expiration date, do I lose my money at expiration if it doesn’t touch $20 or do I get max profit?

I know that if it goes past $20 I would get assigned at expiration or even worst, early assignment, but what about the stock not getting to a certain price?