Author: High Probability Option Trading
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Run time: 58 minutes. Credit spreads provide a low-risk way to profit from selling options without taking on excessive risks. However, traders may fail to maximize the potential of the strategy by not understanding all the components involved. Options expert and former floor trader Dan Passarelli explains the advantages of credit spreads; the dynamics of spread pricing; and his method for selecting low risk/high reward credit spreads. Three factors drive the value of a credit spread: time decay, the direction of the underlying stock, and volatility.
While credit spreads naturally profit from time decay, they lose value if the market moves the wrong way or if volatility increases. The challenge is to lessen risk factors by choosing the right stock, the right options expiration month, and the right strike prices.
Viewers will learn:
– Understand why option credit spreads are a great strategy for generating income, without taking undue risk.
– How to select the right stocks, the right strike prices, and the right expirations to maximize the benefits of credit spreads.
– How to manage every step of an options spread position and to capture profits at the right time.
Passarelli has a gift for explaining options in a logical, easy-to-understand, and realistic manner. This video will give viewers a solid foundation into how to use option credit spreads the same way as professional traders.