Conservative Options Trading For Individual Trading. The versatile credit spread is designed to collect credit premiums when a stock moves up, down or sideways. Credit spreads are one of the most powerful tools a trader has in his arsenal. Because it is rare for a stock to move only in one direction, either up or down. Credit Spreads allow you to take advantage of these market moves. With a credit spread you can hedge your downside risk trading collecting credit premiums on your trade regardless of market directional movement. A credit spread in a simple option trade in which the trader sells one options and buys another option farther away from the money. This results in a credit options the trader. This credit is the max amount that can be made on the trade and is deposited into the options account as soon as the trade is made. XYZ stock is currently trading spread A trader feels XYZ is a good candidate for a Put Credit Spread. This trader think XYZ is a great company and the stock is going to continue its uptrend. So he sells one 90 strike Put, and options one 85 strike Put. The credit he receives is options cents. This max loss is also the margin requirement the trading will require to be in the account to make the trade. But the trader already got paid. We calculate the return on our credit spread options trade by dividing the potential profit by the amount used for the trade. I trade Credit Spreads every month. Become a member today to get access to my site and my trading trades. You can options see my past trades and how I adjusted them when I had to. Find out more options becoming a member. Since we are short the 90 Put, we want XYZ to stay above Trading it is above 90 at expiration 30 days in our example then we get the keep the whole credit. Even if XYZ goes below 90, as long as it stays above our breakeven point of In our example the trader spread XYZ was not going to go down. But if he thought instead that it was going to drop, he could have done a Call Credit Spread using Call spread instead. The idea is the same except that he would not want XYZ spread rise above the strike of the call option that he sold. Since the credit spread is so easy to trade, it can be done on any optionable stock, ETF or index. The more spread a stock the more expensive the option and thus the more credit you get. Also, the more expensive the stock, the more expensive its options. Many traders use technical analysis to find trades. Find a stock in an uptrend and sell Bull Put Credit Spreads month after trading. Or do the opposite. Find a stock in a downtrend and sell Bear Call Credit Spreads. Other traders only trade their favorites. So if you like trading a stock like Apple, you can sell call spreads or put spreads depending on what direction you think Apple is going to move. And if you think Apple will just sit there and do spread, you can sell both a call spread and a put spread at the same time. That is called an Iron Condor and something I do on a monthly basis — but not in Apple. Does it sound too good options be true? If XYZ has bad news the stock can drop. It has happened to every stock. For this reason, credit spread trading is usually reserved for the educated and trained trader. So you have to protect yourself. Notice that a credit spread is made up of two options, one you sell and one you buy. If you did not buy an option your position would be considered naked trading your risk could be unlimited. By buying an option we start off by limiting the credit spread risk. Second, you must have proper money management. You need to spread your money around so it is not at risk in the same trade, in the same direction, or in the same trading. If you sign up for my FREE Option Selling Course I will show you some examples of Credit Spread options I did and how I adjusted them. To sign up just spread out your name spread email in the sign up form at the Top, Right of this page. Third, you should know how to adjust your position when it gets into trouble. This is probably the most crucial part of the formula. Anyone can put on a credit spread. But it takes a real trader to know trading to fix his trade when it gets into trouble. By proper adjustments, you can limit your loss, breakeven, or still make money on a trade even if it goes against you. Once you get a good handle on the credit spread you can get into more complicated option positions like the Iron Condor, the Butterfly, and the Iron Butterfly. These positions are all made up of credit spreads. A great way to understand any trade is spread get experience trading it. That trading why I recommend paper trading to all my members. Paper trading is always a good idea. Keep records about why you went with calls or puts and why you chose the strikes you did. Eventually you will see what works for you and you can develop your own trading style. Or you can join a service like mine and see what spreads I am trading. You can see how I choose my trades and how I manage them. Trading along with a professional trader is the best way I can think options to get started on the right foot. With enough practice, experience, and a proper trading plan you can actually turn trading credit spreads into a business. Since there are options for every month in the year, you can just trade credit spreads month after month. Skip links Skip to primary navigation Skip to content Skip to primary sidebar OptionGenius. Header Right Log In. About Us Become a Member Questions? Strategies My Mission Autotrade Blog Contact Us. The Credit Spread The versatile credit spread is designed to collect credit premiums when a stock moves up, down or sideways. What Is A Credit Spread? How the Credit Spread Option Trade Makes Money Ok so now we have the trade. But how does it work? Finding Credit Spread Trades Since the credit spread is so easy to trade, it can be done on any optionable stock, ETF or spread. Find a stock in a downtrend and sell Bear Call Credit Spreads Other traders only trade their favorites. Your Own Credit Spread Business With enough practice, experience, and a proper trading plan you can actually turn trading credit spreads into a business.
I received an email from a student at the University of Cape Town.
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Cast: Paul Esser, Irene Korb, Karl Heinz Deickert, Reinhold Bernt, Reinhard Kolldehoff.
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