Ep 182: How To Trade Option Debit Spreads On tastyworks

We've talked about How To Trade A Vertical Spread, Call Debit Spreads, Put Debit Spreads and Put Credit Spreads. What I like about Debit Spreads is the reduced cost and they reduce the "break even."

We've talked about How To Trade A Vertical Spread, Call Debit Spreads, Put Debit Spreads and Put Credit Spreads. 

What I like about Debit Spreads is the reduced cost and they reduce the "break even."

For this example, I'm using tastyworks.

I use the PowerX Optimizer to find the best stocks to trade.

When trading there are 3 things you need to know:
1) What to trade
2) When to enter
3) When to exit

TGTX:
- Enter at 20.43
- Expecting stock to go as high as 25.37 (profit target)
- Stop-loss set at 18.61

The PowerX Optimizer told me: 
-Trade the 20 call w/ an expiration of 8/21.
- Spend no more than 2.10 when buying this option.
- Max Risk = $210 (you can't lose more than you pay for the call)
- Max Reward = Unlimited
- Breakeven = $22.41

Here's what I did:
- I sold the 25 call for 0.50
- My cost is now 2.10 - 0.50 = $1.60 ($160)
- Max Risk = $160
- Limited if the Stock reaches $25 or above.
- Breakeven = $21.60
- Reward Cap = if stock reaches $25 or above.

So by trading a spread here, we reduced our cost and breakeven.

Recommended Videos and Links:
Call Debit Spreads Explained: https://youtu.be/9tkZOnG2bAs
Put Credit Spreads Explained: https://youtu.be/8OKG9U9LAog
The Best Vertical Spread Option Strategy 2020: https://youtu.be/CcU40-TjdZM
Options Trading 101: https://youtu.be/tXpBZGj-FiA

Trading Futures, options on futures and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all
investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources.
You may lose all or more of your initial investment. The lower the day trade margin, the higher the leverage and riskier the trade. Leverage can
work for you as well as against you; it magnifies gains as well as losses. Past performance is not necessarily indicative of future results.

Copyright © 2005 - 2019 Rockwell Trading Services LLC, USA. All rights reserved.
Phone: (512) 337-1885, 12600 Hill Country Boulevard, Suite R-275 - #913, Bee Cave, TX 78738


Markus Heitkoetter