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What is Options Spread Strategy?  

First things first – let’s learn about options. An option is defined as a contract for the purpose of buying or selling stock at a pre-negotiated price and date. These options are typically sold or bought at 100 shares of the stock per contract. An “option” establishes a contract between a buyer and seller. This allows them to buy or sell assets at certain prices. That price is also known as the strike price. When an option is traded, the buyer can purchase an asset, and the seller must fulfill that transaction. Understanding options strategies make all the difference between success and loss. Chuck Hughes has been an investment champion for years, and his strategies can help you succeed. 

You may have also heard about call options. This is a contract where the buyer can buy stock at a certain price within a certain period of time. A put option gives the seller the right to sell stock at a certain price within a specific period of time.

Options strategy is an opportunity to make a profit by buying and selling options in the same class. Options include stocks, bonds, and mutual funds. This works on the same principle as standard trading, but with different elements at work. For many, it is a lot easier and simpler to manage once you have the basic strategies down.

The strike price must go above (for calls) or below (for puts) before the stock can be exercised for a profit (option premium) when trading options.

About Options Spread Trading

When options spread trading, you must analyze the market trends in order to choose the right strategy and follow your trading plan. There are three basic types of options spread trade strategies – vertical spread, diagonal spread and horizontal spread. What does this mean? It’s the relationship between the strike price and expiration date of the options of a specific trade. Knowing the terminology is also key, which helps you adapt to other options strategies. Let’s take a look at these three types:

  • Vertical Spread - This is when you move up and down a pricing list to locate options priced differently in the same expiration month with the same underlying security. You also use this process for calls and puts.

  • Diagonal Spread - A diagonal spread occurs when you move along the expiration date and remain at the same price level.

  • Horizontal Spread - This occurs when yo move along the expiration date and remain at the same price level.
Vertical spread


When viewing options prices, you will usually see calls on one side of the strike price and puts on the other side. It is also important to know that options spread strategies are known by a number of terms, such as strangle, condor, bull calendar spread, collar and others.

Building a Better Options Strategy

There are a number of things you can do to build a better options strategy that works for you. Avoiding simple mistakes is important. Here are a few tips:

  • Buy out-of-the-money (OTM) call options with no strategy

  • Use the same strategy in different market conditions

  • You do into have an exit plan before the trade option expires

  • Take crucial risks by doubling up trade options

  • Trade options that aren't liquid

  • Wait to repurchase your short options

  • You do not factor in the earnings and dividend date into the overall strategy

  • You do not know what to do with an early assignment

  • You do not use index options for neutral trades

  • Leg into spread trades
Buy out-of-the-money (OTM) call options with no strategy

Use the same strategy in different market conditions

You do not have an exit plan before the trade option expires

Take crucial risks by doubling up trade options

Trade options that aren’t liquid

Wait to repurchase your short options

You do not factor in the earnings and dividend date into the overall strategy

You do not know what to do with an early assignment

You do not use index options for neutral trades

Leg into spread trades
The bull call spread and the bear call spread can help minimize risk:Bull Call Spread

Using this method requires buying a one-in-the-money call option, but you will also be selling an out-of-the-money call option. This takes advantage of the share price of an asset that moderately increases over a few months.

The bull call spread and the bear call spread can help minimize risks:

Bull Call Spread

Using this method requires buying a one-in-the-money call option, but you will also be selling an out-of-the-money call option. This takes advantage of the share price of an asset that moderately increases over a few months. 

Bear Call Spread

The bear call spread usually comes into play when shares get to a high price too fast and the stock seems as if it is about to drop. They call this a “bearish” stance. The bear call spread calls for buying one out-of-the-money call and selling a one-in-the-money call. This is used when the perception is that the underlying security is on its way down.

How Chuck Hughes Can Help

Chuck Hughes is a noted expert in the field, providing insight and education in different options investing and trading strategies. He holds the all-time record, having been recognized as an international champion options trader eight times.

With 30 years of successful experience, you can feel confident in his expertise as a successful options trading strategist. With his proven system, weekly tips and information, you’ll become an options trading investor without sacrificing valuable time.

Chuck Hughes knowledge can help grow your portfolio and increase your ROI. His EMA (Exponential Moving Average) System and Investing in the Trend strategies can quickly put you on the path to success.

Tap into Chuck’s knowledge now! 

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