Credit Spreads - Put Credit Spreads using SPY for Monthly Income. Examples using Fidelity.

[@jamiesmchen]

Thank you so much for this video, hope you will do more about options.

[@SteveJones-ul9ex]

Great video with examples and explanation. You would have made a fine teacher :)

[@wealthadventures]

Thank you! 😃

[@compoundingloonies]

I do this all day. Credit spread is the way

[@ThetaViajero]

Excellent!

[@Reedtechnology]

Thumbs up just for the De La Soul reference lol. Great content, thanks!

[@wealthadventures]

Glad someone got it!😊

[@sheikh1906]

You got a "like" from me just for the "Potholes in My Lawn" reference

[@wealthadventures]

Ha! Thanks. Glad a few people recognized it.

[@David-lp1mj]

I’ve done a fair amount of these trades and have basically stopped doing cash secured puts. The only reasons to do a CSP is if the underlying has thin trades as the bid-ask spread is harder to deal with on 2 options, or if you’re trying to buy the stock. At Fidelity CSPs require settled cash while spreads are on margin.

[@wealthadventures]

Thanks for the info!

[@Tradelikeace]

Credit spreads will always be my bread and butter

[@dberry256]

Thanks Dave!

[@karinmottola9227]

For the example @ 7:00 minutes in this video, is there a scenario where shares are assigned? Thanks

[@wealthadventures]

If SPY fell below the short strike of 540 there is always a chance it gets assigned. However, it would be an unlikely event with SPY unless it fell well past the strike.

[@OneStrangeJourney]

90% of my portfolio is long, so I prefer to buy that put spread (risking $80 to potentially make $420) as a hedge against market pullbacks, especially with us nearing all-time highs and considering how volatile SPY has been lately. While I enjoy selling put spreads, I prefer doing so during more stable market conditions, without those big pullbacks. I also like to use technical analysis to identify strong support levels, ensuring I sell below those points. But thats just my two cents...

[@wealthadventures]

Nice. I like that idea. A lot of options trading is about hedging equity positions.

[@bunbohue369]

do you do Iron condor? play both sides

[@EPJS]

my experience with these spreads: frequently the SPY ends up just between the long and short put (in this example just at 539 as an example). Loosing mre through rolling than gaining.

[@grodge61]

Nice video. I use this strategy quite a bit as well. Do you consider trading costs which can use up a few percent of gains? Also, what are thoughts on broken wing butterfly which is a put debit spread but then buy a far OTM put to define the risk?

[@patrickalexis6230]

I'm researching and trying to get a better understanding of selling put and credit spreads. Do you keep the premium if your credit spread expires out of the money even if it's a dollar or less away from being ITM? Since there won't be any shares to selling covered calls if you're assigned, is the best protection rolling the spreads? Thanks for all of your content.

[@wealthadventures]

If the credit spread is OTM at expiration, you would keep the premium even if it is a few pennies OTM. I'm not sure I follow your second question. Can you clarify it for me?

[@patrickalexis6230]

@wealthadventures Sorry that wasn't easy to understand. Basically, should we be trying to roll ITM spreads or take the lost since the risk is defined?

[@robertbarry1792]

What DTE and strike price near market price would you use for a bear put spread on SPY?

[@jamesgreen9048]

So you’d use this to limit loss in a big negative price correction. And I assume you’d then buy in at a lower price and then profit from there to make up the 412 you lost? Or you could just have it open and wait for he bounce instead and not realize any loss. Still wrapping my head around this one

[@wealthadventures]

A spread allows you to define your max loss. You can choose what do do at the end of the contract. It gives you some additional choices.

[@gfvillacres]

Thanks for the great content. When implementing this strategy do you always have to sell covered puts or can you use margin? Do you recommend doing so?

[@wealthadventures]

You should have the max loss covered. Concern would be when the underlying is between the 2 strikes at or near expiration and the short leg can be assigned. If you have the cash to cover the short leg, no problem. If not, you would want to stay on top of the trade. If it gets assigned early, you still have the 100 shares along with protection from a significant drop with the long put.

[@thebuddingmusician]

​​@@wealthadventureshow to handle this early assignment without enough fund to purchase, with margin call ringing at the same time?

[@jaxbeachnats5148]

How to close these out, or how to manage as time goes on?

[@wealthadventures]

You can close just like any other option. I typically close when I get to 60-80% of the premium. If the trade is going against me it really depends on the situation. I might close out both legs or I might leave one open. For example, if there is a sharp decline this week, I might close the long leg and leave the short leg open. You would need to have the funds to cover having the short leg open however.

[@robertbarry1792]

What is the maximum DTE you would consider for a Put Spread on SPY?

[@Reza16888]

Hi Dave, another good video! With SPY moving towards all-time high again, and potentially going over it, you might want to have another video about call credit spread!?

[@wealthadventures]

I can do that.

[@robertostrom5957]

How much money is needed to open the trade?

[@wealthadventures]

Width of strikes X 100. So if you sell 3 puts at 100 and buy 3 at 95 you would need about 3x5x100=$1500 to cover the trade. I also close these types of trades prior to expiration as a precaution.

[@no11235]

You still need $30k though incase option gets assigned(it's not a loss but still broker force you to have that or to avoid margin call)?

[@robertbarry1792]

Can you give an example of a SPY bear put spread?

[@wealthadventures]

Just reverse the credit spread and make it a debit spread. So with SPY at 585 you might buy a 585 put and sell a 580 put out 30 days. You are betting that SPY declines. You would have a net debit up front but profit from a decline. Max gain would be the width of the strike minus the initial debit.

[@robertbarry1792]

@@wealthadventures Do you have a video on managering the put spread if the price goes way against you?

[@wealthadventures]

@@robertbarry1792 If you search "spread" you should find some videos but I don't think I have talked much about that specifically. With a put DEBIT spread, if it goes against you and the price climbs quickly, you will take a loss. You can re-position but it will come at a cost. With a CREDIT spread, you have a little more freedom if the price drops and you are in a lost position. For example, if you like the stock at that value, you might close the long leg for a profit and roll out the short put.

[@Hazel66781]

What if it drops to 536? What happens?

[@wealthadventures]

If it ends up between your 2 strikes at expiration, you can take assignment of 100 shares (buy 100 shares) at the short sold put price of 540 and keep the initial premium. You can also close both legs prior to expiration. The long put would be nearly worthless. The short put would cost about 400 to close. You would end up losing about $315 in this case.

[@stevenpaul3886]

Don’t show people this! You don’t do vertical put spreads in a high volatility, environment where you can get wiped out from heavy movements. It’s either win a simple credit or lose 100%. It’s not worth it. Selling puts on the other hand if you’re willing to buy the stock at a lower price is perfectly acceptable. Be very careful with credit spreads if you don’t know 100% of what you’re doing.

[@wealthadventures]

Why do you think a spread is so different from a simple sold put?

[@drewharris6621]

Agree 100% that YOU should not be trading spreads

[@stevenpaul3886]

@@wealthadventures if you don’t know the difference, my point has been made.

[@wealthadventures]

@@stevenpaul3886 Is it the number of contracts that you disagree with? If I sell 1 put, or sell 1 put and add a long put, I'm not sure I can see the harm. Just trying to understand your perspective. Defining risk in an option trade reduces risk. If it is about risk / reward, I can see that.