The Vertical Spread Options Strategies (The ULTIMATE In-Depth Guide)

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The vertical spread options strategies are at the core of EVERY complex options strategy. If you can master these, you will understand 80% of options trading strategies.

In this video, you will learn to master the vertical spread strategies through in-depth explanations, trade setup visualizations, expiration risk graphs, and visualized trade performance visualizations using real option data.

I’m also going to teach you more advanced topics, such as understanding how a vertical spread’s profitability relates to the amount of time to expiration, time decay, and changes in implied volatility.

My hope is that with this video, you can develop a deep understanding of the four vertical spread strategies, and make a gigantic leap forward in your options trading expertise. Not only will you learn the basics and see examples of how the strategies work, but you will also learn to understand vertical spread mechanics like an options trading expert.

If you enjoy this video, please subscribe and share it with your options trading netrowk. And consider following my new YouTube channel for more finance/economics videos: @Chris Butler

Video Timestamps

0:00 – Introduction
0:48 – Video Prerequisites
1:14 – What is a Vertical Spread?
2:21 – Why Trade a Vertical Spread? (Single Options vs. Spreads)
6:05 – The Bull Call Spread (Call Debit Spread)
8:23 – Bull Call Spread Expiration Risk Graph
10:41 – Why is a Vertical Spread’s Max Value the Width of the Strikes?
11:49 – Bull Call Spread Trade Example (Real Data Visualization)
15:09 – How to Close a Call Debit Spread
16:14 – The Bull Put Spread (Put Credit Spread)
18:46 – Bull Put Spread Expiration Risk Graph
20:33 – Bull Put Spread Trade Example (Real Data Visualization)
23:01 – The Bear Call Spread (Call Credit Spread)
24:42 – Bear Call Spread Expiration Risk Graph
26:13 – Bear Call Spread Trade Example (Real Data Visualization)
27:07 – How to Close a Call Credit Spread
28:29 – The Bear Put Spread (Put Debit Spread)
29:45 – Bear Put Spread Expiration Risk Graph
31:19 – Bear Put Spread Trade Example (Real Data Visualization)
35:14 – Vertical Spread Profitability vs. Time to Expiration/Time Decay
40:56 – Using tastyworks to Compare Vertical Spread Prices vs. Time to Expiration
43:31 – Vertical Spread Profitability vs. Changes in Implied Volatility
44:34 – You Want Implied Volatility to DECREASE When…
46:24 – What a Decrease in IV Means for Vertical Spread Pricing
49:31 – The MYTH About Debit Spreads vs. Credit Spreads and Implied Volatility
50:47 – You ONLY Want Implied Volatility to INCREASE When…
52:31 – How to Select the Right Strategy (Some Guidelines)
54:08 – Using tastyworks to Compare Debit Spread vs. Credit Spread Setups/Pricing
1:02:22 – What Happens to Vertical Spreads at Expiration?
1:03:18 – Fully In-The-Money Call Spread at Expiration (Example)
1:05:17 – Partially In-The-Money Spread at Expiration
1:07:13 – Early Assignment Risk With Vertical Spreads?
1:08:26 – Debit Spread Early Assignment Risk: Why You Should Close the Trade
1:12:19 – THANK YOU! Please Subscribe/Like!

VIDEO PDF: https://www.dropbox.com/s/8539whmkhsp87wx/Vertical_Spreads_Ultimate_Guide.pdf?dl=0

Thank you for watching! I hope you learned a lot in this video.

Questions? Comments? Suggestions? Please leave me a comment down below and I’ll get back to you when possible.

==== ADDITIONAL RESOURCES / VIDEOS MENTIONED ====
Options Trading for Beginners (The ULTIMATE In-Depth Guide): https://youtu.be/7PM4rNDr4oI

Lost $30,000 on a $1-Wide Credit Spread (ALWAYS Close Before Expiration): https://youtu.be/rtVFj9nRRDo

My 2nd YouTube Channel (Finance/Investing/Other): https://www.youtube.com/channel/UCQIPHXnm7ODW0HAdfCr1yDw

=== tastyworks BROKERAGE/COURSE Info ===

Get one projectoption course for free when you open and fund your first tastyworks brokerage account with $2,000 or more: https://www.projectoption.com/free-options-trading-course/

Learn More About tastyworks: https://www.projectoption.com/tastyworks/

Comments

projectoption says:

I hope you enjoy this one! I know there was A LOT of information, but my intention was to push you. Please check the links in the video description above for the PDF to the video and for additional resources.

Julian No says:

this is the Tasty kid from 7 years ago. Different look now.

Moke Moke says:

i have a question… what happens if a share is $1.20 and i buy 50 contracts for a $.50 strike. the max cost says $3500 at $.70 limit price, am i simply paying the premium of $3500+$2500 for the shares on or before expiration, to own 5000 shares at an avg cost of $.50? or do i have it all wrong? thanks

XXTHEBIGKEVXX says:

Alright it's been a week. We need more content 🙂

Luis Casas says:

This is an amazing video 'projectoption' team. I've also seen many of your videos from your youtube channel and they are fantastic. You guys could be charging a lot of money for the quality of content you are putting out there. I recently paid a few thousands of dollars on an option course, which quite honestly is very comparable to your content. Again, I'm impressed with what you guys are doing. Do you have additional content that you sell as well? Would be curious to check it out. Again, great job!!!!

Ilya Kurishko says:

great guide, really insightful!

Man Gao says:

Hi,
Got a question here, we all know when we sell options we look for high vol and hoping it will contract and we take profit from that over time so we naturally think when we buy strangle or straddle we hope for iv expansion and not so much for debit spreads and iron condor as we have a leg hedging the short leg. Am I getting this right.

Furqan Waseem says:

Early assignment can also happen if there is ex-dividend date coming or you’ll hv to pay dividend. Can you add it in video as well? Great video

Tom Harry says:

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Joe JEP says:

Hey Chris, again an awesome video. Thanks for sharing . Still do not understand why, increase in IV is good for a short spread that is ITM/long spread that is OTM. Can you please add a video to explain this in details with examples. Thanks in advance.

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Vadivelu Subramanian says:

Good and informative video. Thanks and regards. As a biginner understood some ideas for trading in options.

Gmoneyluv4u says:

Chris Great explanation of implied volatility! The more volatility increases….!!!

Gordana Josimovic says:

YOU ARE THE BEST, I VOLE THE WAY YOU EXPLAIN. BRAVO!

LittleWing says:

Netflix's price really fall after he posted this video, make me curious about how he makes that bearish assumption

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Kyle Rieloff says:

Hey brother first off I just wanna say thank you for teaching me a lot so far but I have one simple question. Can you be assigned on a long call before expiration or day of?

Breslin Hurley says:

Reinforced ideas I have been learning from your channel. And thanks for pointing out the IV Myth!

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