Bear Call Spread TUTORIAL [Vertical Spread Options Strategy]

[@TheLindaZabielski]

I have been watching all your videos and you explain things in such a simple way that I am able to grasp! I put it on a slower speed so I can wrap my head around it as you go, which I would recommend for other newbies!

[@allennerida1854]

By far the most clear explanation I've seen

[@Glodiator]

As always, excellent video. Would love a video on screening for good candidates for this.

[@MCAQUIN0]

So you just let it expire? I don't have to close the Position? I'm with interactive broker. Im trying to close a trade but the limit price says negative like ask is -.09

[@majordelays4909]

Yep as you likely now know lol just let expire

[@libbyduo1419]

so can I close it at anytime i want

[@projectfinance]

Yes

[@NoobRblx56]

Really great work. Everything I know about options, I’ve learned by watching your tutorials. Do you have any content discussing preferred entry and exit criteria for any of the strategies?

[@lenfordmorris1407]

Close out around 75% of your profit

[@Ilyakurishko]

Thank you for the video! One question, if I may. There are calls for Tesla which are 600 usd higher than current price though expiration is just 5 days away. They are fully extrinsic value. There is almost not chance for price to get there. So it is obvious short to benefit from time decay, I’m just trying to figure out where is the catch? It looks too easy to short those calls as they become worthless in 5 days, though price is 3-5 usd

[@jesuszepeda8119]

I am trying to figure out the same thing.

[@fernandodavidez757]

Me too??

[@solracnatylac5294]

Please bear (lol) with me as I am fairly new to options. I have been profitable so far but made a mistake and want to potentially create spread to minimize loss. Background: I bought a call option for a stock that I thought was going up, but the company delayed service due to COVID so now it is going down after shooting up. It is a cruise line (CCL). I think it will go back up, but at a later date. * Current price: $16 * Strike Price for Call Option Bought: $20 * Strike Price for Call Option Looking to Sell: $17.5 * Expiration date: 7/17/20 Questions: 1) Can I (2 days later) sell a call option at a lower strike price to create a spread and minimize my potential losses? 2) If so, what is the best way to close the spread? Should I wait at expiration or close out by reversing what I did before expiration? I am just trying to minimize my losses at this point. I don’t think the stock will plummet down, but I do think it will not reach my long strike price anytime soon. 3) should I close them out at the same time or separately? How do I determine the net price to close out if I bought the options separately and want to close out together? Should I calculate the net credit received and base of that? Ideally, I want to close these options and minimize losses as much as possible rather than holding it so I can just move on. Really appreciate any feedback or suggestions!!!!!

[@karimliulkar]

Are you using IBKR? I am confused about their system. If I want to "sell to open a bear call", I choose the legs accordingly and then I have negative bid-ask prices, negative mid-price and for entering a limit net credit, I also have to put a negative value. Is this normal? And then I am prompted to choose for this combo: a buy order or a sell order. Should it be sell order if I sell to open a bear call spread?

[@billassim9014]

Hi what if qqq is below the 195 call like at 194 thanks

[@IMChrisThom]

In the examples you offer could you not set up a stop to close the positions when you cross your B/E?

[@projectfinance]

You could, but the b/e is ONLY applicable at expiration. It doesn't really mean anything before expiration. If there's 30 days to expiration and the stock is at your b/e, your position will not necessarily have a $0 p/l.

[@IMChrisThom]

@@projectfinance Hmm. Is there something that can explain this further? Or what would be an option/strat to get out before taking max loss?

[@projectfinance]

@@IMChrisThom The breakeven is the price at which the options in the spread will have net intrinsic value equal to your entry price. If I buy the 150/160 call spread for $2.33, then the breakeven is $152.33 because at expiration, the 150 call will have $2.33 of intrinsic value and the 160 call will have $0.00 of intrinsic, leaving the spread with a value of $2.33. Before expiration, the options will have lots of extrinsic value, which means the price of the spread will not be the same as the net intrinsic value in the spread. Net intrinsic value = Intrinsic value in the long option - intrinsic value in the short option

[@marcosmejia8499]

Great examples and explanations. Easy to understand. Thx

[@markelcj]

Very helpful videos. Detailed and concise. My question is why is the max loss not the cost of assignment? What am I misunderstanding in that relationship? Thanks!

[@DermaGlowOasis]

When you buy a long call isn't the stock price supposed to be above?

[@amitg9519]

Thank you for sharing the knowledge. May I request you to make video on premium decay analysis. Example if premium decay is high on call side compare to put it means stock or index price will go down and vice versa for particular expiry.

[@majordelays4909]

Hey I’m only five years behind you . Did you find a video or learn hard way on premium decay analysis

[@rauljimenez6183]

Do you advise to enter a stop loss within the actual bear call spread to exit the trade if it starts going the wrong way

[@projectfinance]

You can certainly use one. I would personally use one if you are selling a spread with way more risk than reward. For instance, if you collect $1.50 in premium for a $10-wide spread, you have $150 to make and $850 to lose. I'd probably close this spread before the maximum loss, but I'd have a trigger for when I take the loss. It could be a literal price level, such as $5.00 on the spread ($350 loss at that point), or it could be closing the spread when the stock price gets to a certain price, such as the strike price of the short call. You can make up whatever rules make sense to you.

[@rauljimenez6183]

@@projectfinance Thank you. Do you have any videos or training about this subject. Ex: how to place a stop( or stop limit) order on a bear call or bull put that is going the wrong way?

[@sukhpreetriyat8505]

Noob question: In that hypothetical with the stock price at 313, Do you get assigned if you let it expire with the 310 call in the money?

[@rookandpawn]

The last point is so incredibly important It's called pin risk and it's literally the stuff of nightmares. It's not what you want to avoid It's something that you should never ever allow happen to you.

[@munster1404]

How about early assignment risk if short call is in-the-money?

[@jamesdonalds5237]

Outstanding explanation. Are there ever situations where you close the short call to lock in your profits but leave the long call open just to take a flyer?

[@projectfinance]

Thank you! Yes, there could be a scenario in which you do that. Particularly if the spread is pretty much worthless (both options have little value). You can definitely close the short call and let the long call ride just in case something crazy happens and the stock shoots up. I wouldn't recommend closing out the short call if the long call still has plenty of value though, otherwise you are completely changing the outlook of the position and will lose money if the stock doesn't increase quickly.

[@jamesdonalds5237]

@@projectfinance Makes sense. Thanks again. Your channel is superb.

[@JakeTheStockGuy]

How do you select your strike prices? Are you looking for anything in the Greeks? Like delta

[@datooriyaz1]

Pls explain how to execute the first leg under a bull call option spread?

[@edwarddaoud2293]

Great presentation. Very clear

[@projectfinance]

Thank you!

[@johnsnow9232]

Excellent video

[@projectfinance]

Thank you very much!

[@sandungabass6666]

Liked and subscribed; got to know about this yesterday but didn't have an idea on how it really works. Thank you

[@projectfinance]

Thanks for the sub!

[@stevent7412]

Subscribed! You do a great job of explaining. One question though - how do you determine to use this method vs the bear put strategy?

[@projectfinance]

Thanks! It's based on preference and what you're doing. If you are making a spread trade based on the stock price remaining below a certain price, a bear call spread (selling a call spread) would probably be better than buying an in-the-money put spread. They are technically the same strategies when using the same strikes. Example: Stock is at $100 and you think it will stay below $105 over the next 14 days. Bear Call Spread: sell the 105 call and buy the 110 call in the 14-day cycle Bear Put Spread: Buy the 110 put and sell the 105 put in the 14-day cycle Both of the above trades will have very similar risk/reward as they are synthetically the same thing. However, in this case I'd choose the bear call spread as the options are all out-of-the-money and you'll avoid potential problems with assignment since the spread is near expiration. If you bought the 110 put and sold the 105 put, your short 105 put is $5 in-the-money and will rapidly lose its extrinsic value over the next couple weeks as expiration approaches. You might get assigned on the in-the-money short put on one of the days immediately before expiration since the short put is in-the-money and will have very little extrinsic value by then. In short -- they are the same strategies if using the same strikes but I'd always sell spreads when you think the stock price will remain within a certain price, and I'd buy spreads when I think the stock is going to make a move in a certain direction.

[@allenzhang6203]

Why not sell ITM call instead of OTM call,could u tell me the difference?

[@ngchongsin2009]

Very good explanation.

[@tahntalus]

So I can let it expire to realize max profit?

[@rudyzk]

You sell and buy at the same time, but i don't understand, to sell something you have to buy it first?

[@justusforviolin2719]

No, and the two contracts act as a hedge. Watch his excellent vid on option basics first.

[@gusjean8744]

Can you exit a call credit spread on the same day of creating it??

[@TheTongueofRa]

Yes, its just a matter of buying&selling your call options to cancel them out. Most brokerage programs will even do most of the work for you.

[@famfam0]

if you have a day trading account, yes.

[@tweetypham8492]

when do i know to use bear call spread vs bull call spread? thanks

[@haydenhenderson5954]

Depends on if you’re a bullish or bearish bro

[@2020nallano]

Great Job explaining Bear Call Spread.

[@projectfinance]

Thank you for watching!

[@zerototalenergy150]

excellent !!thank you

[@franescobar474]

Thank you very much for sharing your knowledge, Chris.

[@ebayybae8061]

Thank you!!! There is no any pro info about Options into Russian.

[@gregoryfield8884]

Okay so max potential loss question. What if your lower sold call is in the money, and it gets exercised? Couldn't you technically lose a lot more?

[@arupian666]

How ? Say you sold the $100 strike and bought the $110... your max loss would be $10 (you have the obligation to sell at $100, but the right to buy at $110)... what scenario would increase that loss potential so that you'd lose "a lot more" ?

[@gregoryfield8884]

@@arupian666 okay so what if the stock goes to $105 and you get exercised on the $100 option but since your $110 call it OTM, it expires worthless. You'd be out $500 in this example and have to come up with $10,000

[@arupian666]

@@gregoryfield8884 Yes, so you get assigned, your account the next day will show -100 shares, and +$10,000 (you SOLD them, remember)... you'd then buy back the shares to cover your short stock position with the $10,000 + $500 out of pocket. So you're down $500. But your MAX loss in this example is $10 (difference between the strikes) x 100 = $1000. So you'd only lose half your max loss if the stock went to $105. (yes, there's assignment fees/the money you got for the premium which will take a small chunk out of what you're down, but easier to stick with round numbers.)

[@CrayCrayRedneck]

Good stuff as usual.

[@bradmcclure4945]

scenario calendar spread buy 4$ jan8th and sell 4$ jan15th for a net debit of 13$ my goal is to exercise the jan8th calls early

[@louisthompson1020]

Great Lecture

[@mikereilly6894]

is the audio not working for anyone else?

[@projectfinance]

Your browser tab might be muted

[@kam9625]

This dudes looking at me like I’m in a video game dialogue sequence

[@projectfinance]

😂 awkward NPC for sure. I got better over time and newer videos are more natural :D

[@breezefor5966]

Great as always! ✔💯

[@projectfinance]

Thank you for the comment!

[@johnsnow9232]

Excellent

[@projectfinance]

Thank you! Cheers!

[@Swishy3wick]

Something is not clicking for me. I am not understanding why the loss potential has a cap. Specifically because we are shorting a call. But the stock price can increase indefinitely, so there is an indefinite loss you might realize when you have to pay to cover your short (lets pretend we have no exit triggers.) Yes the call option price will go up as well in that situation but we can't know how much that stock will go up, nor be sure of what the profit from the long call will be less the loss from the short call. .....right? I must be missing something obvious....

[@projectfinance]

Because you're buying another call above the short call. If you short the 100/105 call spread and the stock goes to $1,000, the short 100 call will be worth $900 but the 105 call you own will be worth $895. The spread's value will therefore be $5.00.

[@Swishy3wick]

@@projectfinance Ohhh it hadn't clicked that we WILL be able to predict the cost of the options at whatever price the shares reach. Thanks so much!

[@panamahub]

Great well elaborated video too bad for non-us citizens is so hard to setup an account with an option broker.

[@nimietyskookumlucre6702]

Thanks man

[@theworldisallyours]

Thanks so much!

[@projectfinance]

You got it!

[@lifeknow-science9275]

Good job bro

[@projectfinance]

Thank you!

[@Crusader926]

Speed 1.25 is wayyyy better yall

[@pauldean7143]

Great info. Please blink... once... BLINK DOOD!

[@projectfinance]

Old video where I didn't blink :/

[@Adrianlandl86]

I liked your infomative videos but found them to put me to sleep. I tried playing them at 1.5x normal speed and problems solved.

[@projectfinance]

Interesting! These older videos were much faster paced compared to my newer ones. Surprised you wanted to speed them up. You must be a very fast learner.

[@Adrianlandl86]

projectoption I wish

[@markspin4596]

Shame that don't allow us Aussies to open a trading account with them anymore...

[@gwentchamp8720]

Awesome video dude !! I'm going to try this out soon since we're in a bear market !

[@projectfinance]

Thanks for watching and commenting! Good luck and stay safe out there in these markets!

[@mauromilo]

Good explanation but you seems a robot, maybe would be better with more pauses

[@projectfinance]

Thanks! Old video and agreed. I think I’ve improved since then. Let me know in a newer video if you watch one. :D

[@ryanbaileyboxing]

you go a little fast but i begin to understand

[@projectfinance]

Yes, sorry for that. I talked way too fast in these videos but I'm slowing down in newer videos. Thanks for watching!

[@ryanbaileyboxing]

@@projectfinance np! still very informative! I am a subscriber!

[@patrickjhonzuniga]

Set speed at 0.75x , problem solved

[@MJoStriker]

BLINK

[@projectfinance]

I do

[@Clippedyou1]

Why dont you mention that you need a margin account and maintenance margin of some amount to perform and hold the trade? This is very important point.