Learning options

[janexs16]

Hey all,

I just want to check if I'm thinking correct, doing paper trading and trying to get a few concepts to stick.

I put on a trade in USO yesterday, which at the moment of my trade was trading at 19 and a bit. I've put on what I belive is a call spread (???). I sold the april 20 call and bought the april 21 call hoping the stock stays where it is or goes down or not up to much. Am i correct here?

Now in my monitor tab i am plus minus zero on the trade. The 20 call i sold is up $20 and the 21 call i bought is down $20. Im not really sure why the two move in different directions though?

All advice is much appreciated!

[Jeffreybar]

Ye any time you sell a more expensive option and buy a cheaper option it is called a credit spread...means you received a credit. Your max profit is the credit received and you max loss is the width of the strikes minus your credit received. So yea when you sell a call spread it is a neutral to bearish play. Don't look at the P/L of the individual positions....pay attention to the overall P/L.

If you put the trade on as one...treat it as one position. Don't try to leg out individual strikes. When the position gets to your profit target buy back the whole thing at once. If the price moves against you...wait it out....your risk never changes...your max loss will never be more than the width of the strikes minus the credit received.

[Josephlela]

Thanks for the reply! Ok I undestand. What would a reasonable profit target be in this case? And in the tastytrade videos they always talk about your probability of success, is this type of trade falling under the category of high probability?

[Jespermeno]

Ok, thanks much appreciated that you take your time to help out. Realise there is a lot to learn about all this. Find it difficult to select the correct strikes, how wide they should be etc.

Can I go somewhere to see how much the credit received was at the time of the trade?

Thanks and have a good evening!

[johnnieoe16]

Ye your trade history should show it. Or just subtract the little number from the big number and that will tell you what you received. are you using Thinkorswim?