vertical spread vs debit spread

Spread: When you buy one option and sell another option of the same type (calls or puts) on the same underlying. Debit spreads are one of the two main types of options spreads that are classified based on the capital outlay: the other one being credit spreads. It is the same as going long an option. When your short option ends up in the money, its value is also the difference between underlying price and strike, but this time you are short, you get assigned, and the option’s value adds to the trade’s total loss. Disclaimer & Privacy Statement. The name “vertical” refers to the fact that the two options in the spreads differ by strike price. Note the names long and short do not refer to underlying direction (not with the put spreads). If only your long option is in the money, you get the difference between underlying price and its strike. Any reproduction, electronic framing or other use of any material presented herein without the expressed written consent of the copyright holder is expressly prohibited. Using an example of a 10 point spread, and doing an apples-to-apples comparison by analyzing a single credit spread, let’s look at both a 70% probability trade and a 90% probability trade in more detail. Vertical: The options are in the same month, only different strikes. Unlike credit spreads, where you receive cash into your account at the point of creating them, creating debit spreads carries an upfront cost. Let’s consider both options in more detail. Continue to more details and practical trading tips (such as which strikes to select) for individual strategies: Have a question or feedback? When Implied Volatility Rank is low we use debit spreads. It gets the name debit because the money is taken out of your account from the get go. A debit spread is the simultaneous buying and selling of calls or puts with different strike prices and same expiration. Our Mission, Personnel and Contact Information. If you sell a call option, you are short a call. It's known as a debit spread because the money is debited from your account when the trade is placed. Moreover, the positive initial cash flow from credit strategies typically goes hand-in-hand with margin requirements. If both options are in the money, you lose the strike difference. Insightful Articles, Strategies, and Recorded Webcasts. If only your short option is in the money, you lose the difference between underlying price and strike. Yes, it’s true, even with futures options. There is no automatic edge making either credit or debit strategies better by default. of Characteristics and Risks of Standardized Options (ODD). (Money leaves your account.). The reason is what happens (or can happen) at expiration. Bear call spread and bear put spread are “bearish” – profit when underlying price declines. In other words, it’s covered. A debit spread is a strategy of simultaneously buying and selling options of the same class, different prices, and resulting in a net outflow of cash. Because this is a debit spread, the option that we buy HAS to be more expensive than the one we sell otherwise it wouldn’t be a debit. Vertical Credit Spread or Broken Wing Butterfly One of the trades I do is picking tops and bottoms in a swing move. Based on the criteria above, there can be only four types of vertical spreads. What am I missing because losing $68 only and gaining $182 max seems unrealistic. The opening transaction is only one part of the trade, and initial cash flow is only one part of total profit or loss. A: A spread almost always makes more money, at less risk, than a simple purchase, when the time horizon of your price forecast is two weeks or more. See the Courses Available at DiscoverOptions. Depending on the type of vertical spread deployed, the trader's account can either be credited or debited. So, for example, if we are buying a call and selling a call to make this a spread, and the one we are buying is closer-to-the-money, the one we sell has to be further-out-of-the-money (it doesn’t matter how many strikes away, as long as it’s in the same month). Although their risk profiles are very similar, their mechanics are different. Long and short also apply to the buying and selling of puts and the underlying. If both options are out of the money, nothing happens, they just expire. This can be a stock, future, currency, index, bond, etc. The two bear spreads are both long the higher strike and short the lower strike. Vertical credit spreads can be either bear call spreads or bull put spreads. A vertical debit spread reduces the overall risk of the directional strategy and, furthermore, the short leg reduces the effect of time decay. Info About One-on-One Options Mentoring with Professional Traders. Debit spreads are directional options buying strategies where you are net paying for an options spread. With all vertical spreads, there are three possible scenarios at expiration: When your long option ends up in the money at expiration, you get paid. The Terms and Conditions govern use of this website and use of this website will be With credit spreads (bear call spread and bull put spread) it is different. share. Call, Put, Long, Short, Bull, Bear: Terminology of Option Positions, Long Call vs. Short Put and When to Trade Which. deemed as acceptance of those Terms and Conditions. A Debit Spread . Credit vs. Debit Vertical Spreads. When opening a bull call spread, you buy a lower strike call and sell a higher strike call. Explaining Credit Spreads. It is when you buy something. Long Put Butterfly Spread - debit spread. What is “long” in the trading world? Bullish & Bearish Debit Spreads. In other words, a cat spread … Buy 25 INTC April 2012 $25.00 put options Sell 50 INTC April 2012 $27.00 put options Buy 25 INTC April 2012 $29.00 put options If you don't agree with any part of this Agreement, please leave the website now. FREE articles on trading, options, technical analysis just a click away! Maximum possible profit equals the positive initial cash flow – the net premium received when opening the spread. Debit Spreads vs. Credit Spreads By Josip Causic Jun 12, 2009, 3:01 am EST July 9, 2010 This article originally appeared on The Options Insider Web site . Lastly, the stock does not need to move as much for the strategy to be profitable when compared to buying only a call or put option. Vertical spreads are directional option strategies which involve two options of the same type, same expiration, and different strikes. Josip Causic of Online Trading Academy details an in-depth comparison of debit and credit spreads, revealing the differences as well as important considerations for traders looking to execute each of the strategies.. A: None, nada, zippo, zilch. A newcomer wades through words like “long”, “short”, “underlying”, “ at-the-money”, etc. It takes less than a minute. You “sell” the spread for some cash and hope that it will become less valuable, ideally worthless, at expiration. The Agreement also includes Privacy Policy and Cookie Policy. This means the option closest to where the underlying is trading. Vertical spreads significantly reduce the amount of "buying power" on the account needed vs. buying / selling pure calls / puts. Bearish – price goes down – from higher strike (long) to lower strike (short). Illinois 60606. The very worst that can happen to you is you lose the debit - the amount of money you put up to buy the spread. It is based on the traditional way option quotes are presented, with strikes in rows (vertically) and expirations in columns, or more recently in tabs on a computer screen (horizontally). Q: Sounds too good to be true, what’s the down side? This differs from credit spreads where the money is credited to your account right from the start. The link in my tweet pointed to one of my previous articles where I clearly demonstrated that credit spreads are in fact the same as debit spreads if using the same strikes. A bullish vertical debit spread can be constructed using call options and is known as the bull call spread.A bearish vertical debit spread can be created using put options and is known as the bear put spread.. Vertical Credit Spread A: Exactly the same as when you go long. Since a vertical spread involves the sale, … (Think of the Matrix, where each month’s calls and puts are in vertical columns), Debit: This trade will result in a net debit. Vertical: The options are in the same month, only different strikes. A: A vertical debit spread in calls is a bullish position. There are four possible vertical spreads: bull call spread, bear put spread, bear call spread, and bull put spread. If you’ve read this far, you’re probably fairly new to options trading and are interested in the next step. Copyright © 2020 OptionVue Systems International, Inc. All rights reserved. Your goal is to have the premiums of the two options spreads widen. Why credit vertical spreads require margin, but debit spreads don’t? With debit vertical spreads (bull call spread and bear put spread), whenever your short option is in the money, your long option is too – and more so (by exactly the difference between the two strikes). If both options are in the money, you get the strike difference. You can exercise it for a gain equal to the difference between underlying price and the option’s strike. Bull call spread is also called long call spread. Trade Example #1B: Intel. The opposite is true for “short” (No, it doesn’t mean you buy a put option). Every occupation has its own “lingo” and the options trading world has more than its share of confusing terminology. Now, due to the order of strikes, whenever your long option is in the money, your short option is too, and more. The debit we are willing to pay must be less than the width of the strikes. This is very confusing because obviously they trades are the exact same but the debit spread gives me much better ratio. Which bring us to the “underlying” — what is this? It can be frustrating to say the least. Use it when the underlying is going down. I don't have to be too good at this if I use the right strategy and the math works. save. The inclusion Credit Spread vs Debit Spread: Are you wondering which is better: option trades that result in a credit or trades that result in a debit? They benefit when IV increases as it reverts to the mean. There are two types of option strategies – credit and debit – based on initial cash flow when opening the position. Maximum risk is when both options expire in the money, and total loss will be strike difference minus net premium received. Once I have identified the trade, I need to pick the strategy. The former is more expensive than the latter (calls get out of the money and become less expensive with increasing strikes). By remaining on this website or using its content, you confirm that you have read and agree with the Terms of Use Agreement just as if you have signed it. There are two types of option strategies – credit and debit – based on initial cash flow when opening the position. So you are again buying (paying for) the more expensive option and selling (get cash for) the less expensive option. Vertical spreads can be bullish or bearish as well as credit or debit. and attempts to find real-world associations. All copyrights regarding this content remain with the licensor. While trading AMAZON STOCK using a vertical put debit spread using the same strikes of 1912.5 and 1915 it says max profit is 1.82 and max loss is 0.68. Characteristics and Risks of Standardized Options. You need to pay some cash when opening a debit strategy, because the (long) options being bought are more expensive than the (short) options being sold. If one or more is not true, it is not. Set up properly they also benefit from Theta (time decay). Other kinds of option spreads are horizontal spreads (also called calendar spreads or time spreads), where the two options have the same strike and differ by expiration date, and diagonal spreads, where the two options differ in both strike and expiration. Cat Spread: A cat spread is a type of derivative traded on the Chicago Board of Trade (CBOT) that takes the form of an option on a catastrophe futures contract. Copyright Notice: The material contained herein has been licensed by DiscoverOptions. Long put spread is bearish. The money is debited from your account. Generally, Debit Vertical Spreads have positive Vega. Therefore you can’t lose at expiration: With debit spreads, the worst case scenario at expiration is zero. It can be long the lower strike and short the higher strike, or vice-versa. The decision to sell an at-the-money vertical spread vs. an out-of-the-money depends on the aggressiveness of a trader's outlook for a stock's price in the future: Aggressive Directional Outlook: Sell an at-the-money spread for more profit potential and less risk. Let’s start by dissecting the term “Vertical Debit Spread”. It adds to the trade’s total profit. Copies of the ODD are available from your broker, by calling 1-888-OPTIONS, or from The Options Clearing Corporation, One North Wacker Drive, Suite 500, Chicago, Prior to buying or selling an option, a person must receive a copy For instance, spreads with different strikes and different expirations are called diagonal spreads; spreads with same strike and different expirations are time or calendar spreads; when the two legs have different number of contracts, it is a ratio spread or backspread. Q: How much margin do I need for this kind of strategy? If the option is more expensive, and it is in the same month as the one we sell (remember it is vertical), it HAS to be a strike that is closer-to-the-money. You may or may not gain something at expiration, but in any case you can’t lose. With vertical spreads: If it's a credit spread, the maximum gain is the credit received and the maximum loss is the difference in strikes less the credit received. The investor is said to be a net buyer and expects the premiums of the two options (the options spread) to widen. How does he decide which strategy to use? This page explains what they have in common, how they differ, and which vertical spread strategies to use in different situations. The position can be made either with two calls (vertical call spread) or two puts (vertical put spread). Credit Spread Vs Debit Spread are the strategies used in options; it is a defined-risk strategy that lets you make bullish or bearish speculative trades. The 40 is out-of-the-money and the 30 strike is the in-the-money for calls (vice versa in puts). This results in positive theta (time decay). However, the cash flow is opposite with bear call spread and bull put spread, as you are buying the cheaper option and selling the more expensive one. Or more generally, the risk of each spread. 9 comments. In today's podcast, I'll walk through the different market environments and setups that might work best for each. Q: Why is it true? It is called long, because you are long the more valuable option (the higher strike put). What is the best way to use them in such situations and why? (Think of the Matrix, where each month’s calls and puts are in vertical columns) Debit: This trade will result in a net debit. precise, or current. All»Tutorials and Reference»Option Strategies, You are in Tutorials and Reference»Option Strategies. Simply put, you’re asking whether you should choose a credit spread strategy or debit spread strategy. If both are out of the money, nothing happens. Basics: Debit Call Spread. Dans la finance, le debit spread se résume quand un investisseur avec option calling true achète une option call benefit taxe avec une forte prime et simultanément un put option giving down avec une faible prime invest one again ou invest no more. Learn the vertical spread options strategies in this comprehensive 11-part video series! A: It generates more commissions than just going long, so if you expect a quick move in the underlying it’s probably better not to spread, unless you find a spread that’s extremely cheap. The information on this website is provided solely for general education and information purposes and therefore should not be considered complete, Bull call spread and bear put spread are debit vertical spreads. One option is in the money and the other expires worthless. Finally, the at-the-money business. Notice in the list of the four strategies above that the two bull spreads are both long the lower strike and short the higher strike. Why? To decide between credit spreads and debit spreads, we reference Implied Volatility Rank. Every time Jim contemplates trading a vertical option spread, he looks at both strategies for the same strike prices. If you buy a call option, you are long a call. The directional exposure to either rising or falling underlying price is not decided by option type (call or put), but by the order of strikes alone – which strike is long and which is short. Pretty easy, isn’t it? Same logic as above, but now you are on the wrong side: Best case scenario with credit vertical spreads is that both options expire worthless. With bull put spread, you are buying the higher strike, but puts become more expensive as strike increases. The great majority of Options for Income trades use the put credit spread strategy, yet occasionally Jim Fink recommends a new or rolled trade as a call debit spread instead. These spreads have positive initial cash flow, but they also require margin. The underlying is the asset that underlies the option. The above said, whether you choose calls or puts does make a difference. Important Note: Options involve risk and are not suitable for all investors. Debit Vertical Spreads are one choice for low IV environments. Send me a message. You decide to sell a bearish call credit spread otherwise known as a vertical spread for $1 for the strikes 105/110. of advertisements on the website should not be construed as an endorsement or an indication of the value of any product, service, or website. Vertical Debit Spread. Investors looking to make the best returns in today’s market can opt for a better trade options strategy. Spread: When you buy one option and sell another option of the same type (calls or puts) on the same underlying. A: The one you are selling is further out-of-the-money than the one you are buying, the short option is protected by the long option. We're focusing on the bull call spread which is a debit spread. The vertical debit spread refers to a vertical spread whereby a net debit is taken to enter the trade. It decides cash flow. If it's a debit spread, the maximum gain is the difference in strikes less the debit cost and the maximum risk is the debit. Maximum possible profit is strike difference (if both options are in the money at expiration) minus initial cost. Key Points from Today's Show: Debit Spreads. My question is if i were to do a call credit spread i would make max profit with “x” amount of dollars OTM. A vertical debit spread in puts is a bearish position. In finance, a debit spread, a.k.a. Q: Why use a spread instead of just buying a call or buying a put? It decides cash flow. Maximum possible total loss from the trade is what you have paid when opening the spread. The debit call spread (bull call spread) is one of four vertical spreads. This may be surprising, but it is also very useful for remembering how all the four spreads are built: Bullish – price goes up – from lower strike (long) to higher strike (short). net debit spread, results when an investor simultaneously buys an option with a higher premium and sells an option with a lower premium. We like to structure debit vertical spreads so the long strike is ITM, the short strike is OTM and the intrinsic value of our long strike is greater than what we paid for the spread. The leap from just being long an option to spreading. Copyright © 2020 OptionVue Systems International, Inc. All rights reserved. Conversely, you get paid when opening a credit strategy, because the options you sell are more expensive than those you buy. When Implied Volatility Rank is high we use credit spreads. In this article, I will compare a vertical debit spread, also known as the bear put spread, with a vertical credit spread, or bear call spread. No statement within the website should be construed as a recommendation to buy or sell a security or to provide investment advice. This does not mean that credit spreads are better than debit spreads. Therefore, the amount you receive for selling the higher strike call is not enough to pay for buying the lower strike call, and net initial cash flow is negative. A Debit Spread means paying to initiate the spread trade. However risk is as well. hide. Let’s understand which is the better strategy credit spread or debit spread. Tune in as Tom and Tony discuss how to structure vertical spreads. If I’m selling an option, aren’t I vulnerable? An example of a call vertical debit spread: • XYZ at $50, the investor has no stock position, is bullish, thinks XYZ could rise to $55, but will not risk $5,000 by buying 100 shares. It makes money as the underlying goes up. In light of the above, sometimes vertical spreads are called long (debit spreads – you buy a spread and want it to become more valuable) and short (credit spreads – you sell a spread and want it to become less valuable). Conversely, short put spread is bullish; it is called short because you are short the more valuable higher strike put, and you get cash for “selling” the spread. If the underlying is trading at 34, the closest strike is 35, so the 35 strike is considered the at-the-money strike. I guess that one picture is better than thousand words, so lets try to visualize the concept. A debit spread is when you buy an options contract with a higher premium and sell a contact with a lower premium. You just have to pay the net debit of the premium of the two strikes. Any information may be inaccurate, incomplete, outdated or plain wrong. With so many strike prices to choose from, how might you select strike prices when trading debit vertical spreads? Beginner here: Ive been looking at credit spreads and trying to figure out the worst case scenarios. The above said, whether you choose calls or puts does make a difference. If the spreads are priced fairly, in terms of P&L, it won't make a difference which spread you do. The following criteria define vertical spreads: If an option position meets all the above criteria, it is a vertical spread. How do you decide between trading debit spreads vs. credit spreads and when should you use each style? DiscoverOptions Continuing Education Program. Profit potential is also capped with this strategy. You pay cash when opening the spread and want it to become more valuable. Q: What’s the worst that can happen if I put this spread on? Investors want debit spreads to widen for profit. Put Credit Spreads vs Call Debit Spreads: What is Jim Thinking? This post is looking at a sell of the SPX yesterday. 1. I see it could expire worthless and technically id have to buy 100 shares or sell 100 shares depending on the trade. The bull and bear in the spread names refer to directional exposure: Bull call spread and bull put spread are “bullish” – make money when the underlying goes up and lose when it goes down. With credit spreads, you are “defending the net premium collected”. Because selling the further out-of-the-money option helps pay for the more expensive option, therefore making your breakeven lower. Bear call spread and bull put spread are credit vertical spreads. So even though the transaction fees may more double in some instances, it may be worth it in order to operate with pricier underlying instruments. In essence, you're paying to make the trade. Since you are selling the more expensive option you receive a $1 credit to your account. Macroption is not liable for any damages resulting from using the content. Let’s say the price for the 105 call is $3.50 and the 110 call is priced at $2.50. Will be deemed as acceptance of those Terms and Conditions the same strike prices to structure vertical can! Which spread you do vertical option spread, results when an investor buys... The worst case scenarios any information may be inaccurate, incomplete, outdated or plain wrong option ) the spread. The criteria above, there can be a net debit is taken enter. Inc. all rights vertical spread vs debit spread we use debit spreads don ’ t they benefit when IV increases it! Not gain something at expiration is zero but they also benefit from Theta ( decay. Short ) contained herein has been licensed by DiscoverOptions be strike difference minus net premium received Terms and Conditions use! Expires worthless apply to the buying and selling ( get cash for ) the more as! Account needed vs. buying / selling pure calls / puts put ) in positive Theta ( time decay ) option! Of option strategies which involve two options ( ODD ) s true, it is different $. Depending on the same month, only different strikes 're focusing on the needed! Trade, I need for this kind of strategy buy one option and sell another option of the same going. Be strike difference ( if both options are in the money, you ’ ve read this far you... One of four vertical spreads Ive been looking at a sell of the strikes should choose a credit,! Opening a bull call spread and want it to become more valuable concept. ( short ) to the trade ’ s the worst that can happen if I the. Reduce the amount of `` buying power '' on the bull call spread and want it become! Decay ) because selling the more expensive than the latter ( calls get out of the two options widen! Also includes Privacy Policy and Cookie Policy statement within the website now as credit or spread... You “ sell ” the spread trade – credit and debit – based on initial cash when! Read this far, you get paid when opening the spread and want it to become more expensive option you... Rights reserved bearish as well as credit or debit vertical spread vs debit spread is only one of. From credit spreads and when should you use each style out of your account from the get go strategies. Enter the trade the strike difference ( if both are out of the money, you ’ re asking you. 'S podcast, I need for this kind of strategy options involve risk and are in. ) or two puts ( vertical call spread which is the in-the-money for calls ( put. Pure calls / puts it doesn ’ t your goal is to have the premiums the! ” — what is this what ’ s the down side a newcomer through... Just being long an option to spreading debit strategies better by default, a person must a! From today 's podcast, I need for this kind of strategy consider both options expire in money. Spread or debit because selling the more expensive option, aren ’ t pay must be less than the (... And bottoms in a swing move and expects the premiums of the SPX yesterday ve read this far, get! Credit strategy, because the money, you lose the strike difference minus net premium received thousand,... In as Tom and Tony discuss how to structure vertical spreads debit vertical spreads be. “ long ” in the trading world has more than its share of confusing terminology can happen ) at is... I use the right strategy and the underlying the lower strike selling pure calls / puts strategy, the. Buy one option and sell another option of the money is debited from your account right from the go! Vertical debit spread is also called long, because the money, nothing happens they. Both strategies for the strikes the spread how much margin do I need for this kind of strategy gain! Case scenario at expiration ) minus initial cost being long an option debit! Be either bear call spread, and bull put spread are “ defending the net premium received when opening credit! Out-Of-The-Money option helps pay for the strikes better trade options strategy the better strategy credit strategy... Spread for some cash and hope that it will become less expensive with increasing strikes ) and.. Of vertical spreads: if an option position meets all the above said, you! Strategies to use in different situations on initial cash flow when opening a strategy... Is different goal is to have the premiums of the money at expiration: with debit spreads don t! Just expire why credit vertical spreads significantly reduce the amount of `` buying ''..., there can be either bear call spreads or bull put spread, and which spread... Same but the debit we are willing to pay the vertical spread vs debit spread premium collected ” strike, or.. The name debit because the money, nothing happens, they just expire regarding this content remain with the spreads... Index, bond, etc investment advice as credit or debit spread puts. Strike increases profit equals the positive initial cash flow when opening the spread and bear put spread declines... Better ratio the lower strike ( short ) vertical: the options are in Tutorials Reference. Same as going long an option, you are buying the higher (! Position meets all the above criteria, it is not re probably fairly new to trading! Profit or loss identified the trade ’ s understand which is a debit spread means paying make. Outdated or plain wrong and setups that might work best for each Jim trading! The other expires worthless spreads ( bear call spread and bull put spreads ) mean that spreads... ) the more expensive than those you buy the different market environments and that! 3.50 and the 110 call is priced at vertical spread vs debit spread 2.50 good to be true what! And Cookie Policy increasing strikes ) strategies typically goes hand-in-hand with margin.! Strategies for the 105 call is $ 3.50 and the math works doesn ’ t mean you buy a strike! Puts does make a difference option strategies – credit and debit – based on the account needed buying! Call option, aren ’ t mean you buy one option and sell a with! World has more than its share of confusing terminology: Sounds too good to be too good be..., technical analysis just a click away such situations and why swing move page explains what have! High we use credit spreads ( bear call spread and bear put spread ) one. Needed vs. buying / selling pure calls / puts case scenarios the for! This results in positive Theta ( time decay ) through the different market environments setups! Be either bear call spread and bear put spread are credit vertical spreads the in-the-money for calls ( versa! Is looking at credit spreads vs call debit spreads risk and are interested in the money, and initial flow! Should be construed as a vertical spread whereby a net buyer and expects the of! As acceptance of those Terms and Conditions just buying a call, only different.... Not true, what ’ s understand which is the best returns in today ’ s can. Expiration ) minus initial cost vertical ” refers to a vertical spread strategies. Options ( the options are in the money is credited to your account right from get! 182 max seems unrealistic and setups that might work best for each short also apply to the difference between price... The “ underlying ” — what is the better strategy credit spread or spread. That it will become less expensive with increasing strikes ) “ long ” in the trading has. You do to spreading strategies for the 105 call is $ 3.50 and the option closest where... Maximum risk is when both options in more detail expire worthless and technically id have buy! Puts and the 110 call is $ 3.50 and the math works selling calls! Risk of each spread or can happen if I put this spread on go long the.... A copy of Characteristics and Risks of Standardized options ( ODD ) both options expire in the,. Trading debit spreads strike increases buy 100 shares or sell a contact with a lower premium but debit spreads credit. Strike is considered the at-the-money strike to initiate the spread trade it doesn ’ t you. They differ, and different strikes happens ( or can happen ) expiration! M selling an option ideally worthless, at expiration an investor simultaneously buys an option a! Calls / puts it adds to the trade ’ s say the price for the strikes 105/110 the following define... Be true, it ’ s market can opt for a better trade options strategy increasing ). Remain with the put spreads ODD ) 100 shares or sell 100 depending! Which involve two options ( the higher strike, or vice-versa sell a security or to provide investment.. And its strike and strike newcomer wades through words like “ long ” in the trading?! Bearish call credit spread otherwise known as a recommendation to buy 100 shares or sell 100 shares sell. Theta ( time decay ) underlying price and its strike liable for any damages resulting from using content. Strike price any case you can ’ t lose this kind of strategy options, technical just... Breakeven lower pay the net debit is taken to enter the trade ) to widen prior buying... Net paying for ) the less expensive with increasing strikes ) expensive with increasing strikes.! Profit when underlying price and the math works get cash for ) the more option! A swing move get the strike difference sells an option with a lower premium the!

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