Get some tips on trading option credit spreads.
Welcome to learning about credit spreads. With this class you will learn the importance of making adjustments and what may happen if you do not understand how to correctly handle your option positions. People tend to like the option spread that is called a "credit spread". We are going to take a good look at this type of spread today. There are teachers that think this is the best type of trade to do, but in reality, you do not know nor understand the high risk it can be. If it is traded all alone as an option spread, it can be very risky. This would mean that it is not being protected by another option trade.
First, your Teacher will teach the "credit spread". It is easy to learn, but you are not told how dangerous this type of trade can be until you trade for awhile. They teach this trade as it is easy to learn and easy to sell, but they do not tell you the truth about this trade and what a high risk it can be. You can lose a lot of money if you trade "credit spreads" and no other trade with it to protect it and this also causes high stress.
It is known that an option trader can go into a "credit spread" with a 90% probability that he will make money. Most beginners believe in this trade, but if you turn your back to the other side of this picture, you may lose big. You need to understand what is happening while this trade is in play. People will not tell you about the high stress that is involved with just trading an option "credit spread."
Sometimes you can be behind the whole time while you are in the trade, but the teachers do not tell you that. They do not talk about how they feel, how worried they are, how difficult it is to sleep at night, and how they are praying to God for their stock to go up before it is over. You are really risking 90% of your money just to make a small 10% profit. At last, the sad thing is you may lose 90% on your first trade. What they do not tell you is that a 90% probability doesn't mean you are going to make money nine times in a row and then lose one time. You may lose it all the first time. This happens often to beginning option traders.
The reason why this happens is that it is a very directional trade, which makes the "credit spread" a problem. Theta is on the good side, but it has Delta and Gamma working against it. Since the Theta only gives you such a small amount that it is working for you, it does not help that much because you are getting very high Gamma by trading this option spread which makes it a very high risk. When the price of the underlying changes, the profit and loss on the trade will also change very quickly; this is why it is so dangerous. You need to know how to protect your trade and beginners are not aware of this.
Now we are through with this class on the high risk in "credit spreads", I would like to say that there are lots of other types of trades that are quite safer than this "option spread." If you do trade "credit spreads," be sure to combine them with other trades so they are much safer and not so risky.
Welcome to learning about credit spreads. With this class you will learn the importance of making adjustments and what may happen if you do not understand how to correctly handle your option positions. People tend to like the option spread that is called a "credit spread". We are going to take a good look at this type of spread today. There are teachers that think this is the best type of trade to do, but in reality, you do not know nor understand the high risk it can be. If it is traded all alone as an option spread, it can be very risky. This would mean that it is not being protected by another option trade.
First, your Teacher will teach the "credit spread". It is easy to learn, but you are not told how dangerous this type of trade can be until you trade for awhile. They teach this trade as it is easy to learn and easy to sell, but they do not tell you the truth about this trade and what a high risk it can be. You can lose a lot of money if you trade "credit spreads" and no other trade with it to protect it and this also causes high stress.
It is known that an option trader can go into a "credit spread" with a 90% probability that he will make money. Most beginners believe in this trade, but if you turn your back to the other side of this picture, you may lose big. You need to understand what is happening while this trade is in play. People will not tell you about the high stress that is involved with just trading an option "credit spread."
Sometimes you can be behind the whole time while you are in the trade, but the teachers do not tell you that. They do not talk about how they feel, how worried they are, how difficult it is to sleep at night, and how they are praying to God for their stock to go up before it is over. You are really risking 90% of your money just to make a small 10% profit. At last, the sad thing is you may lose 90% on your first trade. What they do not tell you is that a 90% probability doesn't mean you are going to make money nine times in a row and then lose one time. You may lose it all the first time. This happens often to beginning option traders.
The reason why this happens is that it is a very directional trade, which makes the "credit spread" a problem. Theta is on the good side, but it has Delta and Gamma working against it. Since the Theta only gives you such a small amount that it is working for you, it does not help that much because you are getting very high Gamma by trading this option spread which makes it a very high risk. When the price of the underlying changes, the profit and loss on the trade will also change very quickly; this is why it is so dangerous. You need to know how to protect your trade and beginners are not aware of this.
Now we are through with this class on the high risk in "credit spreads", I would like to say that there are lots of other types of trades that are quite safer than this "option spread." If you do trade "credit spreads," be sure to combine them with other trades so they are much safer and not so risky.
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Searching for the best education on Stock Options, then visit www.sjoptions.com to find alternative trades to credit spreads like Broken Wing Butterflies and the Super V.
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