Profiting From Call Debit Spreads On Robinhood | #OptionStrategies

so here's the thing options are incredibly hard to trade and an easy way to lose all your money one way to avoid that is using option strategies so in this video I will be telling you how to use a call spread to have success option trading in the stock market so the good news is market moves is back with the hat and the share in the background but you have to subscribe because this is a brand new channel and today we're talking about option trading strategies specifically call spreads which is an easy way to go long in the stock market limiting your risk with option trading there's two reasons why option trading is next to impossible but this one strategy I'm going to teach you in this video eliminates some of the downfalls of option trading so let's get into just the downfalls and why it's really hard for people to be successful option trading number one is you have to nail the direction that's hard enough in the stock market is knowing where things are gonna go up or down calls or puts and then the second biggest thing with option trading is you have to know the time it takes to get to a certain direction or a certain price target which again is next to impossible so you're doing two impossible tasks and that's why I opted in trading is a place for pure failure and the one thing I'm a teacher in this video is how you use call spreads and how they can help you get over the two reasons why option trading is so impossible to be successful at and call spreads allow you to be wrong about the direction completely wrong let's say it goes a hundred percent against you and you don't lose all your money normally you would if you just bought calls or puts but with a spread you can limit the downside to a certain amount also if the stock trades sideways you actually don't lose money with call spreads sometimes you can just break even if the stock doesn't move for a long period of time so there's time decay factor with options is very hard for traders to deal with and sometimes spreads or the best way to get around it and even being completely wrong you still get paid this way so I'm not gonna waste any your time we're gonna get into how to do it how to execute these call spreads on robhinhood more importantly how to have success with them so make sure you like this video and subscribe to a channel this is brand new content that I'm super excited to put out so let's get into the definition first and foremost to give you an idea of what a spread is what positions you're buying and the outcome we can see from it so an option spread is where we have a long position mostly a call because this is a call spread so you're buying one call long and you're having a short position and another call but here's the kicker that other call has to have a different strike price or a different expiration date and or so it could have both different both and we one have one long position one short position and I'll tell you why because one we use for a profit and then the other we use to collect premium as the day's rolled by as the option gets less and less and the premium just starts dropping so what I want to do is explain to you what's gonna happen when you purchase these two options and what your possible profit looks like what your possible loss looks like and then after that if you stay tuned till the end I'm actually show you what it looks like to input a call spread on Robinhood because I know many traders use Robin Hood and it's something it's easy to get into it's easy to put trades with and it's easy to learn from so Robin Hoods what we're gonna be using today to input this call spread show you your different options show you how you make money with this graph so first off what does it look like what's the possible profit and loss so $29 here is gonna be our break-even point when using a spread that breakeven point can change depending on which options you bought any point after that we start making money and then at some point whether it's $32 30 150 we stop making money because this is where the option that you sold is going to be limiting your upside so if we go back to the definition again you have one long position and then one short position so that short position is gonna make sure you don't make a certain amount of money but it's also going to protect you on the down so it's very key that that long position helps us make money but at some their Delta has become even or maybe their deltas are just a little bit apart at that point you're gonna have a place where you're not gonna make any money when the price goes up so the bull call spread limits your upside but it also limits your downside so let's go to the downside what you could possibly lose by doing a bull call spread so under $29 you will lose money every second it goes down but we're gonna hit this one point here which could be 27 26 depends on what you bought depends on what you're trading at this point you are not gonna lose any more money because you have the protection of the short position that you sold and you can go short on Robinhood as long as you go long you're not going to get into a position where you're gonna lose more than that's in your account because sometimes when you have a margin position or a short position you can actually lose more than you have in your account which is pretty scary but if as long as you have that long position that balances it out so you don't end up losing more than it's possible so let's just sum it up really quickly before we get into it show you how to buy them show you which options to look at what happens with the call spread is you're gonna sell one call position and you're gonna buy one call position those could be a different strike prices those could be a different expiration dates and the only goal of selling something and buying something it's limit the downside so by limiting the downside you're probably gonna be wrong on your option trading but if you are wrong with a call spread you have your downside limited you're not going to lose over a certain amount because you sold a certain position and you're collecting money when it drops then the only downside from doing this is that your upsides limited to because you're selling that position so you can make money when it goes up and you can lose money when it goes down but you're gonna be capped you're gonna be capped on the top and bottom on how much you can gain and how much you can lose from that certain trade so if you like this teaching style I have a course that's in the link in the bio it teaches you everything about the stock market how to trade it how to do technical analysis I highly suggest you check it out it includes six months of my trade group for free if you buy it now let's get in how to input these trades on Robin Hood using cgc options so if you're new to a call spread this is really going to help you so basically the price of cgc right now is eighteen eighty so if we're buying eighteen fifty calls we are in the money and that point we are twenty five cents in the money intrinsic value so if I add that to my screen going long with the strike price of eighteen fifty it's gonna cost me sixty seven dollars and here's what you want to do if you want to do the actual call spread you have to sell a call if you can't sell it above the or below the price because it's gonna be more expensive and that's not how it works the only way you can make this work is if you go above the strike price that you're initially at and the key here is you want to buy something that is never gonna be in the money so if this moves up fifty cents then this $19 call is gonna be in the money and at that point it's gonna be worth something so we want to find something that could go to zero or if your risky you could go right on the line of in the money out of the money and just try to collect this premium in case everything goes to zero and this just changes your risk through war this changes how much you can lose in gain in this trade but what you would I would do personally is I would be looking at the twenty dollar strike prices or the nineteen point five s because I can just collect in easy sixteen bucks so let's say I want to be long CGC normally if you're long an option you just buy a call and then that time decay slowly just drops the premium every single day you're losing money so if you're wrong or for trade sideways you're just gonna lose money but the way you limit this the way you get over this is you sell a call position so this just helps you collect premium in case of trade sideways or drops so I want to collect you know twenty five bucks or sixteen I'll collect this $25 nineteen point five strike price so instead of paying $64 for an option I'm now paying 39 that's pretty cool right so I'm actually paying less to get into this position because I'm actually making $25 by shorting this nineteen point five dollar call so that's super cool and that's why this is exciting because you don't have you don't need as much money to get started doing this stuff so all you would do here is click enter and it would execute this call debit spread but here's another strategy I'm not mentioning so what I did right here is I'm playing the weeklies which are options expiring this week highly risky and a high chance that these options just lose all their values so it's very smart to do spreads during weeklies but when you're going long-term this is also a good idea so let's say I'm thinking 2020 maybe April I want to buy some CGC calls because I think CGC is gonna go up so I'm gonna delete these and just go through another scenario so at this point I'm gonna go buy I'm gonna buy column to pick one that I think it's gonna work I think we're gonna hit $25 and I'm gonna add that to my screen over here so I can have a $25 call trading at 132 but this has a lot of time on my side and if it trades sideways this is always gonna drop in value day after day so what I want to do here is I want to buy an option maybe December 20th the 13th is six maybe a little bit closer because if I don't think it's gonna pop or if I think it's gonna trade sideways I can just collect easy premium every single day and limit the amount I'm paying for this option so if I click this $20 option because we're trying to go as far out of the money as possible but still collect a good sized premium if I go far out to $20 and I add this I want to I want to sell it so this is why Robin Hood stinks sometimes as you can make terrible mistakes so you want to make sure you're selling that it only cost you forty six dollars to be long CGC and the best part is if it closes under 20 before December 20th you're going to make $86 so it's really helpful if you're going along for you know extended periods of time where it's a five month call 20 month call you can just sell really short expirations or really short options that are expiring soon and just collect that premium because if you don't think it's gonna pop if the markets gonna keep dropping you can just always make money and then once this expires you can go to the December 27th ones and sell some of those so as we keep hitting those expiration dates you just keep selling calls against your long position slowly collecting premium that's $86 so if I did this twice I basically have a free call that I could just hold and this one expires for 1720 so again if I just sold two positions let's say if I sold another one for now you can't sell two at the same time I would just do one once this expires though you could do another one so the whole point is that you can keep collecting that $80 every single week every single month and then do they do that again do that again and that eventually pays for this long position so selling options pretty attractive pretty exciting and if you know you're not limited to and the good thing is that you're not gonna lose everything in your account and more going short because you're protecting your upside by having that long position so you just don't want to go naked shorts that's gonna be really bad for your account but let's just put in one more option well say this December 13th $20 one so trading at $69 make sure you pay attention right now because I'm gonna teach you what happens on the chart side where the price needs to go for you to make the most amount of money with this setup I just put in so it's gonna be really cool make sure you pay attention so we have a $25 call so I'm gonna head to my chart and again I have a lot of stuff happening and my indicators on the bottom that goes straight to my premium group if you want to be a part of it just let me know I'm just gonna take off everything so we could just see the raw charts head to the weeklies and I have five months to hit 25 dollars for this option so I'm just gonna put 25 dollars in the screen and there we go so 25 is on there and I'll just delete some of these other price levels so 25 dollars is that first level we're seeing so we need price to get above this black line by April 2020 so we have plenty of time could happen kind of super risky to say that it might happen cuz that would be a you know $7 move from here but to limit my downside and help me make money if it goes sideways I'm gonna sell a $20 call and here's the thing this $20 call is expiring on December 13th so the key here is by December 13th if we are under $20 I made 70 bucks and I still can be long this $25 call I have plenty more months to do this that's very cool to me you know if you don't think it's gonna pop above this certain zone it's great to collect that premium so that's free $70 now let's say that you know I want to raise it a little bit higher to 21 $22 in that case I can go further out on this selling call position maybe January 3rd and $22 is gonna yield me again another 60 bucks and this has this is further out as long as we close the price below $22 I will make that full $65 position how cool is that so hopefully this makes sense called debit spreads are just a great way to collect money while being long a certain position like I said before the further you go out on your long position the more weeks you have of options expiring so every options expire you can just collect money every single week as long as you're as long as you have that one long position that is far out the last thing is I cover the pot stock market pretty exclusively if you want to watch that video it's 30 minutes long check it out to the right of me I know you'll love it hey it's market moves coming at you we have the Hat we have the shirt and the background we are back right now and we're talking about pot stocks for 2020 everything

Channel: Market Moves - Matt Giannino

Views: 49,353

Rating: 4.6978068 out of 5

Keywords: options trading, debit spread, robinhood app, call debit spread, call debit spread robinhood, call debit spread explained, option trading strategy, debit spread options, debit spreads, brokerage account, robinhood day trading, swing trader, option trading, option stocks, stock trading, beginner investing, day trading, delta stock price, stock market, robinhood investing, robinhood stock, covered call, iron condor, djia futures, dow futures, djia charts, nikkei 225

Id: SV_XuPPNP4Y

Length: 15min 57sec (957 seconds)

Published: Fri Dec 06 2019