MAKE $1000 WITH THE CALL DEBIT SPREAD 2021 | ROBINHOOD INVESTING

hey what's going on YouTube and welcome back to tech conversations and as always I'm your host Guillermo and as always I'm a financial expert in all lessons professional if you plan on investing in the stock market please consult one first and invest at your own risk so I woke up today pretty happy because I was up about $700 right around on the market open and then as you can see everything went downhill after that we actually take a look here pretty much everything is down today but anyways we're not gonna get into the reason for why that's happening right now not in this video anyways because today I want to talk about call debit spreads or you might also hear it be referred to as bull call spreads and as that name suggests this is a bullish strategy and what that means is basically you want to be treating call debit spreads when you believe that the price of the stock is gonna go up when we'll actually take a look at it and see that and use some examples as well so now before we begin I'm gonna smash that like button and subscribe guys that would really help on my channel I invest a lot of time into these topics and explaining them to you guys and that's all I ask in return so thank you guys so much for your support I really appreciate it and if you haven't checked out my previous videos on spreads i'll pull in those videos in the description below go ahead and check those out as well and like in those videos for this video we're gonna be using American Airlines for our demo again this is just picked out at random there's nothing specific about it so we're gonna go over to trade American Airlines options and so as the name suggests right call debit spreads we're gonna be dealing with calls and so we're gonna be buying a call and roll's gonna be selling a call now remember when you buy a call you're hoping that the share price ends up going above the strike price of the call you bought are now in contrast to that when you sell a call most of the time you're hoping that the shared price stays below the strike price of the call you sold right and so again for this demo we're gonna be using this options profit calculator because it comes in very handy kind of visually see what's happening with our net losses and our net gains on a particular date leading up to the expiration date depending on what the price of the stock is okay so now before we even get into called up it spreads it's important that we understand how but what buying a call looks like and how that works and so let's actually just first take a look at that so here we are I went into this on the basic tab and we went to this long haul okay and so so we're gonna buy a call just to understand what it means to buy it call and how it works so we're gonna go into the symbol you're gonna enter the symbol for whatever stock you're trying to do this with and you click on the price it'll show you the price and then we're gonna buy a call and so we're gonna go into this option I'm gonna click on this button select option and so again remember you can choose an X whatever expiration date you want to so for this demo let's just choose July 2nd again just at random and so as you can see the calls are on the Left puts it on the right but we're doing a call so we're gonna go ahead and buy a call again when you buy a call you're hoping the price of the stock goes up so I'm just gonna choose a random call here we'll choose the $17 strike price so I believe that before July 2nd you know American Airlines will go above 17 dollars a share so we'll click on this one dollar and five cent one so that means for each share and there's 100 shares in this contract we're gonna pay one dollar and five cents so we're gonna end up a 105 dollars and that's actually gonna end up being the most amount of money you can lose right is that 105 dollars and so let's actually graph this out just to get a clear visual on what's happening so let's do that I'm just gonna change the graph range here I'm just gonna add 18 this so you guys can get a little bit more insight actually I'm a little bit higher than 122 okay there we go perfect so as you can see right this estimated returns section right here gives you valuable information right it's really need it it calculates everything for you but as you can see your maximum is 105 just like I mentioned before that's the most amount that you can lose but look at the maximum return infinite on upside what does that mean that means theoretically when you buy a call you can potentially make an infinite amount of money on it right in the way that would work is let's say American airline just shoots up towards infinity and it just keeps going and going and going the higher it keeps going up the more money you keep making and making and make it now obviously that's never gonna happen but you know theoretically it can and so you're gonna benefit more when it goes up more and more and more all right that's what you actually see on the graph right you can see that this is a bullish strategy and that you would want the price of the stock to go up as high as it can go now again the max risk is 105 and that's gonna happen if the price of American Airlines falls at 17 or below and you can actually see this okay so we're gonna focus only on the expiration column but it's neat to see like you know if we take a look at these before they say we don't want to wait until expiration date you can get a clear visual as to what the price would need to be on what date to exit it early and still make a profit but again we're gonna focus just on the expiration column so as you can see at 17 you see this 100 that's a percentage that means you've lost a hundred percent and the hundred percent is the 105 right so so you can see once it's 17 you've lost the most that you can lose which is 105 and no matter how much more down it goes that's that's the most you're gonna lose as 105 but again as you keep going up you keep making more and more and more and more and there's just no limit as to how much you can make okay so I hope that makes sense and I hope you understand how buying a call works so now let's look at call debit spread because let's say for example that 105 dollars is just too much risk for you you can't afford to lose that much maybe you can only afford to lose at most $50 or at most 30 dollars well this will allow you to do that right it'll minimize this risk but you'll also see that you know just the same with others we've been talking about it's also going to minimize the your maximum return okay so so we're gonna go to the spread section here now and we're gonna go to call spread okay and so similarly we're gonna insert our symbols so that's American Airline we get the price of it and so again this is gonna entail us buying a call and selling a call and so let's buy the exact same call that we used in the previous example just to keep this simple and just so that you guys can follow along even easier so again we're gonna go to July 2nd and we had chosen the the $17 strike price one which is this one firefighter so the exact same call we're gonna buy as we did in the previous example but now let's try to minimize this risk there's one hundred and five dollar risk so we're gonna do that by selling a call and so it's going to select the options okay and remember that's what right means I mean salad so remember it has to be the exact same expiration date which is why it shows up on that same exact expiration date and now for this we're gonna want to choose a strike price that's higher than the strike price of the call you bought so let's actually use like these let's just keep it simple we'll just use an $18 strike price and so for this we're gonna get paid 74 cents per share and since there's a hundred shares we're gonna get paid 74 dollars and so what this is gonna do is this is gonna minimize the amount enough to pay right because you're gonna pay 105 to buy the call but you're gonna get paid 74 to sell call and so now you're gonna pay 31 cents per share and since there's 100 shares you're gonna pay thirty one dollars and that's actually gonna end up being the most amount you can lose now right so that's pretty cool now you're losing you know you can't lose 105 now the most you can lose is 31 and some people might like that but let's actually take a look at what happens to our max return and now so we calculate this alright again I'm gonna hook go a little bit higher on this at let's just say 20 let's take a look at this now let's actually start off with looking at this estimated return section so again your maximum risk now is 31 dollars right and that's gonna happen if if again I'm not gonna look at these but we still look at expiration date if the price of American Airlines does not go above 17 dollars right which there's a strike price of the call that we bought right so if it does not go above 1700 before expiration date you're gonna around the expiration date you're gonna lose the most amount to Canada which is 31 dollars that's again what we see here right no matter how hard below 17 you go 31 is the most to lose right so at 17 or below you lose 31 dollars now after it starts to go up to 17 here we can see that you're making money right and you're making money and you're making money and you're making money but let's actually take a look at what happens once you hit 18 right so at 18 we're making money ray or 69 but now let's take a look at what happens when we go even higher 69 69 69 now you can see that the most you can win is $60 $69.95 - now only $69 is the most you can make from this right so again has its pros it has its cons and you kind of kind of walk you gotta weigh up the risk to reward ratio and figure out if this is what's best for you right so best possible case scenario here and what you will want to happen is that the price of American airline ends up the price ends up being above the strike price of the call that you sold right so if it's a Bobby if it's 18 or above you're gonna make the most like 10 our worst possible case scenario is that American Airlines the price of it falls below the call of a strike price of the car you bought because that 17 or under you losing the most now let's take a look at what happens in between right so let's say it actually falls in between both of these at 1750 right so what happens there well you didn't you didn't get to the short call right so you wouldn't be forced to to sell the shares but it's gonna happen is it's gonna get to 1750 and so what's gonna happen is you're gonna but that's actually not used 1750s and so it's not grab let's use let's do 1740 so let's say over to 1740 well this expired worthless right so 1740 what's gonna happen is you're gonna end up buying 100 shares at 1740 all right me know you're gonna invite 100 shares at $17 per share which is gonna be $1700 but since the price right now 1740 you're gonna end up selling it for that price and so 1740 - 1700 that's $40 but keep in mind you did pay a 31 dollar fee so 40 minus 31 is 9 right and so that's what you'll see here right is that you at 1740 you're gonna make $9 and then again once it hits 18 you've made the most 69 and as it goes up you've made that's the most you can make so I hope that makes sense okay it might be a little confusing at first but again I encourage you guys to come into this Options profit calculator just mess around with it and you know until it starts to make sense right and again it's really nice to get have a nice visual on this right because let's say I don't want to wait till expiration date but I want to make at least $20.00 right well you can let's say I want to exit by you know June 23rd well I can be like well it has to you know the price has to reach at least you know 1780 for me to make $20 right and then you can base you know do you want to do this off of that or that so that's very neat this is very neat to have and again check it out so now let's jump over back to Robert fit and actually show you guys how you would create this debit spread so again we're gonna buy a call so I believe we choose we chose July 2nd for this and so we're by a call and we're gonna use the seventeen dollar strike price and then we're gonna sell call again if the strike price is higher than the one we bought so we'll use this 18 that's how you do that and as you can see it recognizes this as it called that it's spread immediately as you can see now instead of if we were to just buy the call right and pay you know name is three dollars now we only have to pay $26 but again the amount that we can potentially make is gonna minimize and so then you can continue right you can decide how many contracts you want you can try to ask for a higher limit price again some most of the time it needs to be somewhere in the middle for the contract to get filled and then you can review order as you can see we're gonna buy to open a call at a seventeen dollar straight price and then we're gonna sell to open a call at an $18 strike price and so then you would submit and you would successfully have a call debt spread on American Airlines right and again you know if at any time you know prices of American Airlines changes you can jump over here type this in and you know just look at the graph and understand you know where the you know where the price might be heading are depending on you know what day it is and if the share price is changing or not so I hope that guy I hope that makes sense to you guys if you guys have any questions the best way to get a hold of me is to my discord I'll put a link to it in the description below me and my friends we post weekly watchlist we talk about day trading swing trading trading options so feel free to join if you want also if you plan on using Robin Hood in the future feel free to sign up using my referral link in the description below if you sign up using my link you receive one free stock when you sign up which is free money for you so go ahead use that if you'd like and as always guys I hope you enjoyed the video later it was a nice think in the comment section below and I'll see you guys next time

Channel: TechConversations

Views: 29,125

Rating: 4.8666668 out of 5

Keywords: call debit spreads, call debit spread, call debit spread robinhood, call debit spread explained, debit spread options, debit spread options robinhood, debit spread options strategy, market crash, robinhood, robinhood app, robinhood stock trading, robinhood stocks, robinhood options explained, robinhood options, robinhood investing, stock market, trading options robinhood, call debit spread max profit, call debit spread in the money, debit spread, debit spreads explained, stock

Id: 9k_EDa2ed-w

Length: 15min 16sec (916 seconds)

Published: Fri Jun 19 2020