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

Hey everyone, Kirk here again from Option Alpha and welcome back to the daily call. Today, we are going to be talking about some vertical spread examples and also going through the advantages and disadvantages of trading spreads. First of all, what is a vertical spread? Well, there’s two types of vertical spreads generally. There are debit spreads and credit spreads. Debit spreads are when you are trading two different option contracts and the net result is that you end up paying a debit, so you’re paying to get into the position which means that you’re an option buyer. If you do a credit spread, that means you’re trading two different option contracts, but the net result is that you get paid a net premium or a net credit which means that you’re an option seller. In either case though, they are still classified as vertical spreads because you're trading two different contracts. Where you can adjust your spreads is mostly on spread width, so how far out you end up selling the contracts or buying the contracts