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Long Vertical Spreads | Options Crash Course: Strategy Management

4 053 views | 6 Feb. 2021

In episode #2 of

In episode #2 of Tastytrade's Option Crash Course: Strategy Management, we move into another one of the most popular defined-risk option strategies: the Long Vertical Spread. While the Short Vertical Spread that we saw in the last episode is a great short premium strategy that puts the probabilities in your favor, the Long Vertical Spread is a good long premium strategy that allows you take a directional shot on a stock, without having to absorb a ton of negative theta from that position.

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Shaun Glendinning

Always a pleasure watching you explain thing so well! Appreciated Jim.

Stephen

Just yolo gme

scorpionhks

So you lose 100% of premium paid without keeping a stop loss if it’s not going in our favor?

Tom Claussen

Thanks Doc Jim! I will set the win close order for 50% of max profit as you said though rather than credit received as the slide used said :-). Thanks again, keep it up and keep smiling!

CJ Chun

"Do nothing?" Ummmm...I've loved all your short teaching videos you have, but this one I would have to disagree. You can manage it by rolling it down and right, b/c the beauty of the spread is that while one leg is "dead" in the water, you have enough delta and, if done early enough, you don't have theta burn out your "whole candle" so to speak. They key is doing it at the right point (x days) before expiration. I have successfully taken certain losers, if I had done NOTHING--into winners. That's the beauty and flexibility of vertical spreads. Just as you wouldn't buy a luxury car w/o the wheels, why drive the options w/o it?

Shridhar Choudhary

I’m the one to hit first like.

Nnamdi Nzelibe

What of debit spreads?

Christopher Biggs

Why 50%? Why not 75% or something a bit more than 50%?

kyuiop fghjkkk

Question: so I understand that delta is just a first derivative of BSM, or rate of change with respect to stock price. But then they just take delta and use it as a probability of being ITM for seemingly no reason. Am I missing something?

Rail Traders

Great stuff thanks