Bull Call Spread TUTORIAL [Vertical Spread Options Strategy]

[@projectfinance]

✅ New to options trading? Master the essential options trading concepts with the FREE Options Trading for Beginners PDF and email course: geni.us/options-trading-pdf

[@notes_from_under_ground]

It's incredible: In all of your videos I don't think you've ever blinked. Impressive.

[@projectfinance]

Haha only the older ones / first ones where I'm on the camera. These old vids are bad!

[@notes_from_under_ground]

@@projectfinance They're all very helpful dude, thank you!

[@notes_from_under_ground]

@@projectfinance Also, this is probably a stupid question, but in example 1, how is it that the 70 call expires worthless still if the stock price remains below the 70 strike? You want the stock to expire below the strike price when you sell a call option, right?

[@jackf498]

​@@notes_from_under_ground yes.... price IS below 70 so the call is therefore worthless because the stock price did not exceed 70.....ITS A CALL ,,SO PRICE NEEDS TO BE ABOVE THE STRIKE (70)TO BE WORTH ANYTHING...the call option is worthless to the person who bought it from you...

[@johneturbo]

@@jackf498 What happens if the call that you sell in the vertical spread also goes in the money do you have to sell 100 shares to who buys the call? I thought the maximum outlay is the cost of the vertical spread?

[@stangtrax]

NO, NO ,NO @17:49 if someone bought a 100 shares of stock they did not loose $4,500. People need to learn the difference in unrealized vs realized returns. I really appreciate your options videos and keep up the good work. I have the investing down pat. I am trying to learn more on options that is why I really like your channel.

[@projectfinance]

Well they did lose that much, even if they didn't realize it. The point was to compare the P/L of the spread to the 100 shares. Thanks for watching

[@kevinp113]

I love how your videos are not too simple like most of what KZbinrs do. I actually learn stuff from your videos. Cheers.

[@projectfinance]

Thanks for your comment!

[@sc5922]

how do you calculate the spread price P&L with time decay in 10:58? is there a formula?

[@sheana2005]

This is a great explanation. I love how you walk through actual examples.

[@getahunalemu248]

R ed g

[@HighStakesBlackjack]

Thank you, thank you, thank you!!!.......Excellent video. I've been searching YT on this subject and trying to wrap my head around how bull call spreads work for over 2 weeks. Your video has finally explained this concept in laymen's terms and the light bulb has finally went off in my head! .......BTW, I also hit that ravishing "like" button (Sorry Charlie, ZipTrader) as well as the "subscribe" button.

[@projectfinance]

Awesome! Thanks so much for the comment. I'm glad the video was helpful. I'm all about trying to help people get to that light bulb moment! -Chris

[@carlosroman586]

Nice Video! Sorry for butting in, I would appreciate your initial thoughts. Have you heard about - Genevi Sonadelyn Eradicator (erm, check it on google should be there)? It is a good exclusive product for making money using this effective options system minus the headache. Ive heard some great things about it and my cousin at last got astronomical success with it.

[@brandonkawabata346]

Great examples and explanations!! This guy is El Profesor

[@armithel3133]

Thanks for the clear articulation, I didnt really understand options until this video, spreads look really really easy!

[@deshiusstocktrader8172]

You are option universe guru. Salute for sharing your wealth of knowledge

[@shinhwang9225]

thanks for great video. How can I setup 75% profit limit on Call debit spread and put credit spread?

[@bballgtr]

Thank you for a no BS - super-secret strategy as so many firms tout these days. I want to learn and this video and some others on Vertical spreads are generally to the point! Thanks again!

[@StefanoOlla]

Loved this video. It is the most clear and well-explained I could find. The chart examples were key. Really good job!!

[@armonkohan4271]

Thank you! Quick question regarding the when you buy a spread that is already in the money: Since you don't have to hold the position through expiration, can close your position that same day since maximum profit potential is attained? In this example FB only had to reach 175 for max profit, but it was already at 178.22, so what makes it to where you can't immediately close your position? Thanks!

[@brighambaker3381]

It took me a while to figure this out as well. You're paying more for that option than the option value, so you'll definitely want to wait for it to go up. The 49 strike call would only be worth the difference between the current price--57.47--and 49 dollars, so you wouldn't want to exercise the option, because it's only worth 8.47 right now, which is less than the 11.10 that you paid. It also works like an insurance policy against the one you sold if the stock takes a huge run. I hope that helps.

[@JuanPablo-ki8qk]

Today I started watching the video from Argentina, fantastic! very well explained! Thank you so much

[@jimkiser1429]

I subscribed to a couple paid services on a trial basis. However, this vid allowed me to comprehend buying a call spread perfectly, since it outlined three different strike selection strategies in the same video. My paid services, although claiming to be geared toward beginners, always got to a point that it was talking over my current knowledge. Interesting that, sometimes, free is better than paid. Thanks for this vid.

[@projectfinance]

I'm glad you found these vids!

[@destorms]

Appreciate the full breakdown, finally saw a video or resource explains how expiration and closing works, thanks a lot!

[@uclamutt118]

I just found your channel and have been binge watching your videos! You’re a really great teacher! Keep up the good work! Thanks!

[@projectfinance]

Thanks so much!

[@kathywright4073]

Ok, I’m in for a three hour lesson! Looking forward to it!

[@nnrq822]

When you go to close the position you must close both legs of the trade correct(As in one trade)?You cant close individual legs when they become profitable correct?Also can you close this trade at anytime before expiration?

[@pattyaap7345]

Thank you for showing real time charts in your videos. Your content is great, charts just make it awesome!

[@projectfinance]

Thank you for the awesome comment!

[@stanivens776]

can someone explain me how the short option at 7:15 went worthless. I thought that while you short you have to rebuy the a call with the same strikeprice. You hope the stock price drops so you can buy your new call for less. In this example the stock price drops, so I would think you make profit out of the short call. The video's says that it will expire worthless. Can someone tell me why pls? Maybe @projectoption?

[@andrewalday7834]

I'm also wondering the same thing.

[@sonecah99]

If the stock price is at $149.81 at expiration, it is below $155 which is the strike and you wouldn't be exercised and it'd expire worthless. You're right about buying back, but if you wait until expiration and the stock price is below the strike it means extrinsic value is $0 and intrinsic value is $0 as well, so you can relate as if you were buying back for $0. If you buy back before expiration, you will have to pay something (maybe just a few cents).

[@stanivens776]

@@sonecah99 thank you!

[@SandeepKrishnappa]

Thank you! I have followed many other videos and blogs, nothing helped me to understand better than what you have demonstrated:)

[@jefrox123]

Chris- THANK YOU!!!! You save me a lot of time from studying Options! great content!

[@harism5589]

Great presentation!! Very useful Q and A.

[@Lestat103]

I entered a bull spread today on LCA with an expiration date in November. If you have a look at the numbers on expiration day, it looks pretty good. Let's say the stock moves from 17 to 24. At 24, you will make about 200% profit, but that's on expiration day 2 months away! At the same share price of 25, but a month prior to expiration - the profit gets cut in half due to the fact that short call still has significant extrinsic value. The ratio between the two is tighter, the spread is smaller. Moreover, if the stock goes to £25 in a matter of days, the profit gets cut down even more drastically, amounting to about 40% to what you would make at the same price on expiration day. These are my conclusions: 1. Unlike a normall call, the bull spread ages much better. You make more money as the calls decay. 2. Not good if a spike is expected, and then a pull down towards expiration. Any 'rules of thumb' of where to use bull spreads, and when not to?

[@jontattum1476]

Thank you for the video. In my opinion, the most important part of it is at 30:36 , because if an investor is unaware of this fact, it could spell financial ruin for them. Thanks again. Great channel.

[@elClubdelas7Cifras]

hi at 16:36, the 39 spread price.. was the price set by the market. If expired at the short call price, spread price would have been 60 USD, right? thanks

[@papitapapito7530]

i enjoy the video very much, but one question: why wait for expiration? can I take my P/L anytime I want just like selling your stocks, your puts, calls anytime I want?

[@projectfinance]

Yes, you can take profits / close the trade whenever you want. You'd do that by selling the call spread you own (sell the long call, buy the short call) and you can do that in one transaction.

[@RobertTaylor-im7el]

Great video! Any chance you could recommend a good options strategy book for advanced beginner?

[@geelinglim2146]

Thank you for your clear and very informative sharing. I have learnt so much from your videos.

[@moesadr3342]

One of the best videos I have seen so far. One quick question though, any idea as which option strategy could have the highest profit potential at its lowest loss potential?

[@Theater1TV]

In 2 seconds I learned the difference between option and a regular trade. Thanks great video 📹👍

[@lilstiggyandfriends7808]

Thanks for demonstrating getting in and getting out.

[@ogchizzybeats4854]

I have a question on example 2. Why would someone buy a 575 call if the stock price is $569.92? Wouldnt that be considered out of the money? Should we focus on buying in the money calls and selling an out of the money call for bull call spreads?

[@4a6vamsi]

Do u have any tricks to remember Max loss and max profit for all bull and bear strategies?Do u have formulae in one place for all strategies?

[@matthewlincoln7082]

This is helpful to all those newbis out there...Also I will be Recommending expert Robert Anderson for all the beginners who lost and will want to recover all their lost so far. I have been benefiting a lot from him and he also guided me on how to retain my earnings each year, tax information for trades, LLC and trading. Basically to avoid harsh taxes.

[@catherinepresley6683]

Wow, tax management is priceless.

[@cityprepping4660]

I have seen different recommendations about expert Robert, he must be very exceptional for people to talk about him like this. But I still have a bitter experience with this PROs

[@mildredlevine2691]

I'm a beginner in stock trading, Please how do I get informed about stock trading?

[@matthewlincoln7082]

@@cityprepping4660 Well said, but there are experts who dedicate their time and resources to study the different strategies and mastered them, this are people we should go for trading advice

[@matthewlincoln7082]

@@mildredlevine2691 As a newbie, it's best to avoid jumping in forex trade without expert guidance

[@sam-pz5zf]

I feel like buying/selling closer ATM options would be better right? You’d have a lower break even price and could get out of the trade quicker.

[@shreepi327]

Thank you!! Awesome explanation. I have one question...can we only get max profit in bull call spread only at expiration, not before right ?even if the stock price is substantially higher than the short call you still can't make max profit by closing the spread before expiration right?...please answer iam.lil confused here..thanks!!

[@JK-vb9ps]

Typically u get max profit at expiration but if before expiration, share price hits your short strike price, you should consider to close your position prematurely as the profit difference at this point vs max profit at expiration may not be very significant. Analyse the trade with your time curve to confirm this. With time balance you are risking it since share price can come down.

[@shreepi327]

@@JK-vb9ps thanks!!😊

[@josephg8818]

Nice explanation, is there anyway to get assigned stock? If you let it expire?

[@projectfinance]

You can get assigned if your short call ends up very deep in-the-money or if you hold it through expiration. You won't get assigned on a short call unless there's very little extrinsic value in the call. Please watch this video for more information on this, it's very important to understand so you don't worry yourself too much: kzbin.info/www/bejne/baG3k2SXaq6aga8 But if your short call is in-the-money at expiration, your long call is too, and the exercise/assignment will offset: Long Call Automatically Exercised: You'll buy 100 shares at the long call's strike. Short Call Assigned: You'll sell 100 shares at the short call's strike. The two offset and you'll have no share position, but you'll pay exercise/assignment fees. It's best to close spreads before expiration, especially if they are in-the-money.

[@josephg8818]

@@projectfinance thanks , good videos, question, you use tastyworks, so do I. How accurate is the p/l theo and can you use active trader with options? And you cant detach the chart screen on a separate screen right?

[@samueljoseph6542]

You are my best Option Teacher.

[@projectfinance]

I'm glad to hear it! Thanks for watching my videos. -Chris

[@lilstiggyandfriends7808]

Could you explain a straight call without the spread? Is there a break even? What is the disadvantage? Greater profit?

[@trd7538]

Hi can I ask do we need to own the 100 share first? Or we can use this for naked trade?

[@mobileentertainment212]

nice video, do you use a simple ppt to make these videos?

[@TKFun-hc4rk]

Very clean, simple and excellent explanation!

[@merajulislam2232]

Such a best video since i watching videos of options. Thank you so much boss.

[@miketoolami5394]

Thanks a lot, it was great explanation and visuals.

[@e.sanoop110]

Hi. Nice vdo. What are the risks involved in doing a Bull call spread with In the money or Deep in the money options😎😎😎

[@benneely3164]

Really appreciate all the videos!

[@projectfinance]

Thank you!

[@articho28]

Thank you for the video! Very well explained :) I have a question regarding the situation where you buy a spread that is already in the money: higher loss potential and lower profits but higher probability of being profitable at expiration. This may seem dumb from my part, but you mentioned earlier in the video that the owner of the spread does not have to hold the position through expiration but can sell as soon as the maximum profit potential is attained. In that case: how does it work if you purchase a spread that is already very close to reaching full profit like at @24.58 and want to exit? I'm sure I'm missing something. Thank you!

[@FVCK-]

For it to be that close to maximum profit already, that would mean the spread is very close. So the maximum profit wouldn’t be very high at all per contract. This would be used more as leverage if you’re not sure which direction the stock will go just yet, but want to get in without risking IV crush if it dives instantly if you just picked a regular call option. This particular type of option makes more profit when the spread is farther apart, and for that to reach maximum potential quickly would require a massive gap up. So if you think a gamma or short squeeze is coming this would be an option to use if the strike prices are juiced up but you still want in with less capital at risk.

[@GB-kl2pd]

Hi. Can I use debit spreads to day trade spx? I day trade spy now but like the tax breaks spx offers. Thanks

[@brandonjones5093]

Great video! When my spread is at expiration ,and the stock is above the break even point do I have to do anything else to get my profits?

[@projectfinance]

Thanks! You can take profits at any time before expiration. You don't have to wait til expiration. If you buy a call spread and the stock price increases, you can sell the call spread at its now higher price and realize your profit. It's just like buying stocks in that you can enter and exit whenever you want. You can buy a call and sell it 30 seconds later if you want. The expiration doesn't lock you in.

[@sheddy8370]

Been studying your videos over the weekend (big fan of your videos) and started practicing with a paper money account today. Today I bought a TSLA 410/420 call spread for $1.70 expiring Sept 18 . Both my long call ($410) and short call ($420) closed ITM. The profit on the day is $305 but not yet 50% of the maximum profit of $830. What is the risk of letting the short call stay ITM towards expiration? What happens if the call holder exercises early? Do I need margin to cover? Or will I be able to offset the exercise with my $410 call? Wondering because my live account will start small and will only have a small amount of margin (Canadian too if that matters). Not enough funds to sell someone 100 shares lol. Curious about this. Thanks a lot!

[@Twistedspine7]

I have question about when to sell you spread for profit. Is it common or wise to sell the call first for profit and then hold the short call to perhaps see maximum profitability if it expires worthless? Or is it best to just sell the spread together at once? I'd guess you could do both as it totally discretionary? Thanks

[@sonaldeshpande1411]

Thank you for this video it's really helpful to understand Bull Call spread Strategy. I have a Question: In your previous video of Call Options Explained for Beginners, you mentioned when you short (sell) a call option then if Stock price goes down then you will get profit. Then how come in bull call spread you have short call and you will be in profit if stock price goes up ? can you please explain, both seems contradictory. Appreciate your response, Thank you in advance!

[@mertyasar78]

I really enjoyed this video, your style is perfect, I like it ! Thanks a lot and good luck.

[@projectfinance]

Thank you! I'm glad you enjoyed the video. I appreciate the comment and viewership! -Chris

[@dasnova101]

In the example you have explained, If the system generate my maximum profit to be $200, does that take into account the money I use to place the trade too? Say I used $400 to place a trade and the system generates my maximum profit to show $200, does that add up to $400(My trade money) + $200(Maximum profit) or I’m at a lost of $200?

[@projectfinance]

If you see a profit of $200, that means your position increased by $200 from your initial purchase price of $400 (the position is now worth $600).

[@robertz1962]

Dude, you're awesome!!! Thank you so so much!

[@Medess_stuick]

Thank you for the video. I really love your presentation I got interested after watching your beginner guide and every time I feel confused your great video provide a clear and easy to understand tutorial. Good Job

[@Rahul-qb4bs]

Is the profit mentioned in the video made by exercising the call? Or is it something we automatically get when the call expires. I am confused as to how to cash those profits in. Because when I see selling calls they always have a bid and ask price so how is the exact price determined. To excercise the call do I have to buy the shares ,sell the shares? Do I need to have enough money in my account for that to actually make profit from the spread.

[@tieungu14]

What if you’re buying out of the money, and the strike price remain OTM. Do you just lose your premium? Are you only expected to exercise your option if it is ITM? And also, when you close, do you always close both at the same time? Thanks.

[@andrew_ng]

Very helpful video. So basically, once in the profit zone OR above max profit zone. We will just close both the buy and sell? Assuming we do not want to hold the stocks. Thanks

[@1csegal]

Thank you!! Do you by any chance have a cheat sheet on options to share with us please?

[@codesymphony]

what happens if stock goes above the short leg before expiration? can you close for max profit? update: nvm, answered at 13:00

[@joshuayusuf2371]

Great video! Quick question, do you just let your options expire in the when you've realized a profit or sell to close?

[@projectfinance]

Well if you continue holding after said profit, you could lose those profits by expiration if the stock price moves against you. Typically you will want to close in-the-money options/spreads before expiration.

[@anoldreddevil]

@@projectfinance How do you Close the position....individually or with one click someway?

[@lifeknow-science9275]

Bro, u r awsm, i learned a lot of ur channel , God bless u

[@projectfinance]

Thank you for the comment! More videos coming soon so stay tuned!

[@EagleSZN678]

Thank you for the video!! Best explanation that I've seen! With a call debit spread, because time decay doesn't negatively impact your profit, would it be more beneficial to wait until Wednesday/Thursday to buy a weekly spread? Seems like it would be cheaper but your profit would still be the difference between the strikes right?

[@ronniecarter3123]

Not always the case. The long call, being further in the money, will have less extrinsic value to decay away than the short call on the higher strike. Therefore, all other things being equal, you will generally find that the closer you are to expiration, particularly in those last few days, the same spread will cost you more to enter. OTOH, there may be less risk since there is not as much time left before expiration for things to go awry on you.

[@abeautifulworldnow]

Do they always have to be in the money vs out of the money. What if they are both “in the money” just at a lower/higher strike price?

[@kkay8209]

I really enjoy and appreciate your videos. They are very informative. I just want to make sure I understand something. If I am trading a Bull Call Spread and the stock moves in the opposite direction of where I believed it would, and I hang on until expiration and do nothing, then I am only on the hook for my max loss correct? My understanding is on any of the vertical spread strategies you can never lose more than your premium or the spread difference less the premium, correct? In other words you will never have any surprises if the options expire and you do nothing.

[@DermaGlowOasis]

Thank you :) If this is your first time watching this you might have to watch the video a couple times!

[@JayChill01]

In the first example, since the price far exceeded both option strike prices I'm a little confused.since I also sold a call, I thought I will be liable to purchase and deliver those shares?

[@MG-iw2ky]

What is it called if you buy a bull call spread but with the long call at a further out expiry date than the short call? And how does that strategy work? Thx.

[@Buckybarnesfan22]

Thank you for your informative and clear videos. You are able to make a difficult concept simple and easy to digest. Thank you!

[@Justin-pu5pb]

Would the buy strike price be considered the short leg (strike price closer to stock price)? Is it a rule to have stock price between buy strike and sell strike?

[@charlesstitchwong3124]

absolutely the best video i've seen on this topic. i finally understand. subscribed!

[@projectfinance]

Awesome, thank you!

[@jrn935]

if its a stock you want to own, would the best outcome be expiration just under the sold call option. that way you can purchase the stock and re-sell a higher covered call on it? thanks.

[@datooriyaz1]

pls advise after setting up both the legs for a bull option and i want to exercise the first leg in order to included the stock in my portfolio; what would you suggest i watch out for?

[@No1TasLis]

Great examples. Thank you!

[@evalasman]

Best explanation about option spreads.

[@hanst7218]

How do i use the greeks and implied volatility using this strategy to select the best options that suits my thinking of market direction?

[@jackf498]

does tasty works offer a paper trading platform for practice?

[@davidchristieshow]

Right.. YOu get to buy the stock at the strike which is a lower price. Doesn't the exchange just settle the trade in cash if you're not assigned?

[@YOUTHOUGHTBOI1]

I wish i could like this video 10 more times

[@421mantis]

I got one more for ua

[@luckyone8159]

Do you need a lot of capital to open a bull call spread? Lets say the stock is at 155 u buy the 155 call and sell the 160put for contract expiring next week. Lets say next week the stock is at 170 and u get an early assignment for the 160 put, what happens next? Ur forced to sell 100 shares at 160 for 16000, but now u have to buy the 100 shares at 150 at 15000 and u keep rest of the profit right. But what if you dont have enough capital to buy 100 shares at 150, what happens next. Sorry im little confused.

[@neerajjoseph9464]

@projectfinance Options noob here.. how is this strategy different from placing a stop loss on the call buy ?

[@davidsouydalay7153]

Should I let my Bull call spreads expired to get the maximum gain when the stock price is above my strike prices at the expiration?

[@dannytetreault]

That was amazing 🤩 !

[@parixit141]

What is best platform use for trading to use when doing call spread or covered call positions to minimize the transaction cost?

[@projectfinance]

I trade with tastyworks as they have amazing commissions for options traders and their trading platform is easy to use. If you are interested in learning more about them and potentially opening an account, I should mention that there's a standing offer I have where you can gain access to the exclusive options course on the website if you use the projectoption referral code when opening your account. No pressure though! www.projectoption.com/free-options-trading-course/ tastyworks.com/pricing/ www.tastyworks.com

[@parixit141]

@@projectfinance thank you for introducing to tastyworks. Their pricing looks really great but unfortunately it will not work for me being a Canadian Citizen. Will wait for tasty works to start i canada. Thank you for your reply 🙏 😊

[@manajsarkar5172]

is it possible to use this strategy for Intraday trading ?

[@APLachel]

Great video. keep it up!

[@marklipkovich7048]

Hello Chris! Thank you for the great explanation! Can you please clarify about profit/loss expectation? In one of your examples POP= 64%, Max Profit= $380 and Max Loss = $1120 . If I understand correctly, the profit/loss expectation is 0.64*380 - (1-0.64)*1120 = -160. The final example is better but expectation is still negative (-31.5) . Is it correct way to calculate expectation or I miss something? Does the profit/loss expectation depend on strategy (bull/bear, call/put) or inputs (strike price, expiration date, etc.) and how can we maximize it?

[@projectfinance]

The calculation you did for expected value assumes a full profit or full loss based on the POP, which isn't how it works in reality. If you have a POP of 64%, that's the probability of a $0.01 profit at expiration. Which means there's theoretically a 36% probability of a $0 P/L or worse. So in your calculation, you are assuming a 64% chance of a full profit and a 36% chance of a full loss.

[@marklipkovich7048]

Hello Chris. So how can we estimate profit/loss expectation to compare two strategies (formula? software?) We have POP, Max Profit and Max Loss but need one number.

[@Gunner2x]

say if the debit expires worthless do you lose your shares as well

[@bestreitips]

Great video and channel. Thank you for all the training. Question, at the end (31:02 mark) when you're doing QA you said, that if at expiration the stock price is in the middle that the short call would expire worthless, but that "you will purchase 100 shares per call at the long call's price" however, isn't a long call the RIGHT and not the OBLIGATION to purchase? I'm confused? Are you saying that it would be wise to purchase them and resell at higher price or that I would have to purchase the stock from long call? Thank you.

[@HuntingWolf82]

I don’t understand either, I too thought that if a long call was in the money it was a right not obligation.

[@orian3131]

I need help understanding. So when you buy a bull call spread. You profit once price goes at or past the strike of the short put right ? And does width matter? Is there a significant difference from a short width let’s say a 2 point width to a long width?

[@projectfinance]

When buying a call spread, you will make money if the spread's price increases, which will occur if the stock price rises and does so quickly enough to offset any losses from time decay. It doesn't really matter where the stock price is if it is above the short strike. If you buy a call spread, such as buying the 100 call and selling the 110 call, you will make the maximum profit at expiration as long as the stock price is at $110 or above. It could be at $125 or $150, you'll make the same profit at expiration since the spread's value will be $10 (the width of the strikes and therefore the spread's max value potential). There is a difference between spread widths in regards to profit potential and loss potential. Wider spreads will have more risk (they will cost more to buy) and more reward potential (since the width of the strikes is wider and therefore the spread has a higher max potential value. For instance, if you buy a $2-wide spread for $1.00, you can lose $100 and you can make $100. If you buy a $10-wide spread for $4.00, you can lose $400 and you can make $600. If you buy a $50-wide spread for $30, you can lose $3,000 and you can make $2,000. Narrower spreads will have less risk and less profit potential compared to wider spreads. I encourage you to set up some spreads on a trading platform and analyze the differences between profit/loss potential across the different setups. I hope this helps! -Chris

[@Eastbaypisces]

So do u sell the option right after u buy it, won't u still need the $in ur account?

[@tayreaction4457]

I needed this information. I learned so much. Thank you. Now I must find a video that discusses if both legs are in the money prior to expiration, can it still be exercised.

[@boydizza]

Will this be considered a Day Trade. Either if I buy them together in the same transaction or in individual transactions just a few seconds apart. I have not yet tried this. I use Robinhood and actually have about 5 (PMCC) I entered into the (2-Step Strategy) with my Long Leg deep (ITM) and about a year long, and my short legs (OTM) are either weekly or monthly end dates. I did not hit with any (Day Trade) Marks and I thought for sure I would having an account un $25,000. So my questions is does this Strategy considered a (Day/Trade) because both legs have the same expiration date and were purchased at the same time with a Buy/Sell transaction and if so I am assuming I will get hit with another (Day Trade) if the (Stock) Price reaches or surpasses my (Sell/Call) Short Leg triggering me to have to exercise my now (ITM) Buy/Call Long Leg on the same day to cover the shares. Please let me know if this is true.

[@davidbyer2201]

Nice video. What happens at expiration if in the money on both options ?

[@projectfinance]

Then you won't end up with a stock position, but you will pay exercise/assignment fees.

[@davidbyer2201]

projectoption how much are those fees? On a bull call spread for example and the long, short calls are in the money does what investor collect the full fee and doesn’t need to do a trade to close out ?

[@johneturbo]

In IBKR when I tried to do a vertical call spread it said "this account may not hold positions short call" and doesn't let me buy the vertical spread :? Do I have to own the stock before I can do a vertical call spread?

[@alexanderfrost2943]

Just like Rufus before me, thank you very very much. I really love your videos. I learned a lot from you.

[@DermaGlowOasis]

How do you know how far the strike price should be to purchase and sell an option.

[@jacobmctaggart1351]

Not sure if this has been covered, but I am curious about this as it appears my account is making it difficult to complete an options trade. Do you need to have the capital available to complete the total value of the contracts underlying asset, in order to buy the contract in the first place. For example, if you buy a spread that allows for say a max profit of $5k, and a max loss of $2k, but the contract of 100 shares is worth $40000 (each share is worth 400), then would you need to have $40k available in the account ,as well as the cost of the premium for the spread, in order to purchase? If your intentions are to sell the vertical spread, or even if you plan to exercise the option (assuming share price increases above the strike price), then technically you would be "buying" the shares. However, is the broker/account not capable of just buying at contract price and then selling the shares instantaneously at market price, therefore for the capital would not be necessary? In this sense you would be just taking the profits of the difference in strike and market price, and would not need the original capital of the underlying assets total value. Hopefully my question is clear. I understand there are rules in place to protect individuals in trades, and understandably many brokers will auto exercise options if not done by end of contract (I am assuming they are only capable of exercising the option, and not also auto selling the underlying asset thereafter). The reason I ask is because this would then require a large amount of excess capital to be available in order to make meaningful option spreads, such as ones that may have P/L of a few $K or more (also because commissions/fees on lower value contract are generally flat rate and completely imbalance the P/L at those levels).

[@projectfinance]

Hi Jacob, You only need the amount of money required for purchasing the option/spread. For example, if a spread/option costs $2,000 and has max profit potential of $5k (like your example), you'd only need $2,000 in your account to buy the spread/option. You do not need the value of the potential share position (such as buying 100 shares at the strike price of $400).

[@jacobmctaggart1351]

@@projectfinance thank you for the swift reply! Much appreciated on the clarification. Is this any different if you simply sell a put by itself to someone and it is excercised ITM? This would enable the buyer to receive the underlying assets at the pre determined strike price, and if they wanted to excercise and keep the shares rather than sell immediately for profit, then as I understand it you are responsible for "buying" those shares. In a case like this does the contract owner pay everything up to the share price, and the seller of the put covers the difference? Or does the put seller have to put up the full amount if they decide to excercise? I only ask because my current platform does not allow single transaction verticals currently. Instead one would need to buy each leg separately, however that transaction could be blocked if expectations were to own the capital in that case. Really appreciate all your help! Watched your full video series on options, and also a few others. So well explained and easy to follow! Cheers