The Right Way To Buy Options – Long Vertical Spread

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www.SkyViewTrading.com

Most traders start out buying options because it’s the simplest option strategy to understand. If you think a stock will go up, you’d buy a call. If you think the stock will go down, you’d buy a put.

Well this is NOT a very good trading strategy because you’ll lose money every single day due to time decay. No smart investor is going to buy a depreciating asset and call it an investment.

Watch this video to learn a better way to buy options to make a directional bet on a stock but WITHOUT time decay hurting you. We’re going to show you how to trade the Long Vertical Spread to accomplish this.

Also, make sure to sign up for our FREE 3 Video Lesson Series at www.skyviewtrading.com!

Adam Thomas
Sky View Trading

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Vertical Spread Option Strategy
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Iron Condor
Bull Call Spread
How To Trade a Vertical Spread
option trading basics
option time decay

Comments

Event Trading says:

Great advice 4 "pick a stock, any stock." The fact that your profits are capped, as well as your losses, is the issue. I suggest placing more emphasis on the Underlying. This means you have to do your homework so that the probability of success is nicely in your favor. One winner can cover ten losers. I use verticals when I'm less certain, straight buys when I'm convinced of direction & time.

Vnam72 says:

There is no benefit to trading options over, say, spread betting.  And if the market is random you're just as likely to lose.  You're still betting that the price of the stock will go up or down.  If you keep picking the wrong direction (scenario 3 in the video) then you'll lose money…again and again and again.  That's what happens when you spread bet or do any other form of trading. So, what's the point.

Paul Lajera says:

My I ask what Software you are using and what your suggestion is for a brocker?

Balram Astro says:

One of the best videos on options. ..

damarcuswilson1 says:

Do you sell the 7.50 call for the 9.50 or do exercise your contract and flip the stocks?

Melanie Nguyen says:

i am sooo lost… can someone explain to me how he get $750 from 70 and 7.50??
I got a dofferent answer when I multiply 70 and 7.50

sam iamdj says:

What a well done and easy to understand video. Perhaps the best of it's kind I've watched. Thanks for sharing.

Craig Cox says:

SkyViewTrading.. Do you have an "optimal" date range you look for when trading a Long Vertical Spread? 10, 20, 40, 60+ days?

Parag Sathe says:

Very good and nice examples.

Del-boy 205 says:

Great videos just placed my first vertical spread on tos mobile I-pad but can't find a way to sell the vertical as one transaction. Could you help. Many thanks in advance.

CJ says:

Nice video! What program did you use for the graphics?

Steven Ahmson says:

Hi, What trading platform do you use?

Sujan Shrestha says:

Great Video but there was small mistake on the videos. On scenario # 1, the profit is not 90% bcoz the original cost was $500 but you don't get the premium of $250 as you have already deducted that amount from $750. 🙂

Richard Brooks says:

At 2:55 does the long 70 call have to drop below 70 in order to exercise the option? The chart doesn't show it dropping below 75 roughly and there's a 9.50 profit? If not, what's stopping a person buying the call option for 70 and selling it right away and making a 5 difference (75-70)?

Scott Fatt says:

Hi, I enjoyed your video but I just have a few quick questions. In scenario 1 you say that 'at the expiry date' the long 70 call is worth 9.50. My question is how exactly do you manifest that theoretical value into real value? I understand that the call option is worth 9.50 but that is only if someone is willing to buy that call option right? Do people really buy a call option 'at the expiry date'? And if no one is willing to buy it then is that option essentially worthless (that is unless you exercise your right to buy the share at $70 and subsequently sell it at $79.50 meaning that you would in fact own the share for a brief period of time)?

Sorry I don't know if that makes sense but hopefully you can clear that up for me. I am from Australia btw.
Thanks

Corey McGovern says:

For Scenario 1 on the Vertical Spread when it says:

Long 70 Call @7.50 -> 9.50 = +200
Short 80 Call @2.50 -> 0.00 = +250

I understand the first part with the Long Call but how would you make +250 on your short call? If the stock changed only .50 from the strike price of 80.00 wouldn't it +50 on your -250 investment, resulting in -200 for that Short 80 Call?

I am probably wrong, just curious! Thank you for the great video though !

Legacy Vibez says:

whats a good app for beginners?

RedondoBeach2 says:

Outstanding explanation of vertical spreads! I appreciate the thoughtfully scripted narrative and easy to understood visual. I've watch similar videos that many assumptions about the viewer's knowledge and experience with options trading, causing the videos to be ineffective for an introductory level of understanding. Prior to watching this video, I never understood why anyone would buy call options in the money. This video cleared that up for me. This is the first of your videos that I've watched. My hoped is that you also have more advanced lessons, and within those videos, you also refer viewers to other more basic videos like this one, if there's a need for a prepatory level of understanding prior to understanding more advanced concepts. Most of all, thank you for making the video clear, concise, and edited in a way that makes every second value added.

StewieGriffin12468 says:

Your videos are awesome and super helpful for a rookie like me trying to learn. My question is what are the exit choices? Specifically for a bull put and bear call credit spreads. I know that if taking max profit you can let them expire and keep the credit. BUT if the market goes the other way, can you let them simply expire and take a max loss OR do you have sell/but to cover your positions??? Many many thanks!

Jo mo says:

What would happen if you hedged the vertical spread and put more money on the shorts and less on the longs but the market did not cross the shorts, kinda like a reverse iron condor?

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