Short Put Vertical Options Strategy Explained

Описание: Check out our Vertical Options course - https://www.udemy.com/course/basic-op...

A Short Vertical ("Credit Spread") is one of the building blocks of option trading. It requires you to pick a stock price direction (in this case it would be upwards), and as long as the stock price stays above your sold ("short") strike, this trade will be profitable.

It is a strategy popular among traders who want consistent returns without spending too much time preparing and executing trades, and also carries with it the huge benefit of being a "defined risk" trade.

When making vertical trades, you will know exactly what your maximum potential profit and maximum potential loss could be, which is why these kinds of trades require very little monitoring and stressful nights.

A credit spread is formed by selling one option (put or call) and then buying another that is further out of the money.

The maximum potential profit for this trade is the "credit received" and is calculated by taking the difference between the premiums collected for the sold option and the cost of the purchased option. The maximum potential loss is calculated by taking the width of the strikes and subtracting the "credit received."

Profit on this trade is achieved by either purchasing back the position for less than the credit received, or keeping the entire premium ("credit received") at expiration if the stock price closes above your sold short strike.

Happy trading!

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All the information shared in this video is provided for educational purposes only. Any trades placed upon reliance of SharperTrades.com are taken at your own risk for your own account. Past performance is no guarantee. While there is great potential for reward trading stocks, commodities, options and forex, there is also substantial risk of loss. All trading operations involve high risks of losing your entire investment. You must therefore decide your own suitability to trade. Trading results can never be guaranteed. This is not an offer to buy or sell stocks, forex, futures, options, commodity interests or any other trading security.