The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “Why trade single options versus option spreads?” I think this question really boils down to a difference of risk and reward. When you trade single option contracts or you go naked and that's whether you buy a call or buy a put, sell a call, sell a put. In any case, whether you do a single option trade with no spread attached to it, you are sacrificing a little bit more capital potentially for the possibility of a higher return and for a shorter trade duration. For example, if we sell a call option, we are selling pure options, we don’t have to buy anything, so it doesn't reduce the credit that we took in from selling that call option, but we do have to put up a little bit more capital to do that (that's the trade-off, that's the risk and reward aspect) and we potentially could be holding the trade for a shorter duration because if the stock moves down or implied volatility mo