Stock Trading - Make Wall Street Pay You Money

Let me introduce you to the idea of Wall Street paying you money. To get the stock market to pay you money you need to get to know the world of stockstackup.com" title="options trading">options trading. In the world of stockstackup.com" title="options trading">options trading, if you trade more than one option at the same time (buying one and selling the other) that is called a spread. If the spread costs you money, it's a debit spread.

However, if it puts money in your account, it's a credit spread. A credit spread is usually theta positive. That means that it makes money from the passage of time.

The passing of time is a sure thing. (Note: that does not make your trade a sure thing, but it does stack the odds in your favor).

ere's the basics of a credit spread. You sell an option that is more expensive, and you buy a cheaper one.

Here is an example.

If ABC stock is trading at 100, and you sell a call option with a strike of 105, and buy a call with a strike of 110, then you are in an out-of-the-money credit spread. (This is called a bear call spread).

A bear call spread or a bull put spread (the opposite thing) are the simplest credit spreads. There are more complicated ones too. You can do an iron condor, or an inverted butterfly. Speaking of that, you hear a lot about the butterfly spread, but not much about the inverted butterfly. If you want to do something interesting, study about the butterfly spread. Then realize what would happen if you flipped that around.

I think you'll like what you discover.

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