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Track 'n Trade Futures End of Day Options

Debit Spreads

Video Transcript

In this Track 'n Trade Pro Options Trading Training video, I want to talk to you about in the money Debit Spreads. If you think the price is going up, you can buy an in the money Call Option and sell in an out of the money Call Option. Or if you think the price is going down, you can buy an in the money put option, and sell an out of the money Put Option.

Here's how it works: If a particular market is trading at 100, you might Buy a 90 Call and sell a 1/10 Call. Or you might buy a 1/10 Put and sell a 90 Put. The main benefit of this strategy is that the time premium of the Option you sell, out of the money Options consist entirely of time premium, of course. Will offset the Time Premium of the Options you buy. So, your position is not subject to time decay, which means you get the leverage without having to worry about any time decay, at all. So, if the price doesn't go anywhere, you don't lose money!

If the price moves against you and you get out with a small loss, as long as you practice good money management, you should be able to maintain, just a small loss. If it moves the way you want it to, you can make a profit all the way up to the strike price of the Option you sold.


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