Clarification on options jargon regarding spreads
Are Option spreads profitable?
Only the strike price is different. Vertical spreads allow a trader to earn modest profits with less risk than buying a naked option and with considerably less risk than selling a naked option.
Bear Call Spread.
Stock Price | Profit/Loss | |
---|---|---|
S ≤ K1 | = Credit | Maximum profit: all options expire worthless. |
How do you exit a spread option?
Exiting Losers
- Spreading to a vertical. Just like with the winning trade, sell a higher-strike call in the same month. …
- Spreading to a calendar. If there’s enough time left in your long call, another idea might be to convert it into a calendar by selling a shorter-term call with the same strike.