The Power of Option Spreads

We’ve been talking about the importance of options. But most people don’t just buy or sell a single option. Options can be combined into myriad different strategies which can give you even greater flexibility. In episode 7, we’ll discuss the power of option spreads, plus review the week in the market.

Topics Discussed

• [02:23] – Market update: stocks trading down almost 2% due to reopening concerns
• [06:57] – The market only cares about the economy
• [08:49] – The Week in Review
• [11:50] – It’s been a good week for Brandon’s portfolio
• [12:30] – Winners for the week: NKE, XLF (unrealized), SPY, IWM, TLT
• [16:48] – Losses: EWG
• [17:30] – Rolled out: MRK
• [18:49] – Options let you make a profit, even when the market is down
• [20:04] – The Power of Option Spreads
• [21:07] – Options can be combined in many different strategies for greater flexibility, and greater capital efficiency
• [23:38] – What are debit spreads and how do you use them?
• [28:39] – Advantages of debit spreads:
  1. Lower outlay of cash
  2. Lower breakeven price
• [35:14] – Disadvantages of debit spreads:
  1. Lower maximum profit
• [41:07] – What are credit spreads and how do you use them?
• [48:00] – Advantages of credit spreads:
  1. Limits your max loss
  2. Lowers margin requirement
• [50:37] – Disadvantages of credit spreads:
  1. Lower maximum profit
• [52:00] – There are more advanced strategies, which we’ll covered in more detail in a later episode
• [56:03] – Summary

Resources Mentioned

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