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Vertical spreads options trading strategy

Vertical spreads is the flexible options trading strategy and is the foundation for the most complex strategies such as iron condor, butterflies etc.

Initially, I thought of making a video on vertical spreads and was browsing for ideas. I stumbled upon this video from ProjectOption. This is the most comprehensive video I have come across on vertical spreads. I got to say that this video is little longer but has everything that one needs to know about vertical spreads. I was amazed at how Chris covered some advanced topics such as effect of implied volatility on the spreads. He also mentions how extrinsic value plays a significant role in spreads not recognizing their maximum potential and how one can play the spreads to get the max potential. In this video, Chris covers

  1. Why Spreads compare to stocks?

  2. Different types of spreads – bull call spreads, Bearish call spreads, Bull put spread, Bearish put spreads

  3. Break even, Max Potential gains and losses for each trade.

  4. Effect of implied volatility on the spreads

  5. Synthesis of spreads – How one spread nullifies the other

  6. Which spread to pick – Long call spread or short put spread, Short call spread or long put spread.

  7. What happens when options are exercised and assigned for different scenarios – ITM, OTM, ATM

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