Option Spread Trading Strategies Explained

What are Option Spreads?

An option spread is a type of complex options trade.

When option spread trading in the stock market, a trader can utilize one of two types of options trading strategies. They can either buy or sell an outright option or make a complex option trade.

An outright trade is a purchase or sale of an option on its own. It’s much more simple than a complex trade, which is why most options traders deal in outrights. A complex trade strategy involves option spreads.

Although option spread trades are more complex than outright trades, and they only comprise a small amount of trades in the options market, these types of trades can be extremely lucrative while reducing risk of loss.

However, trading option spreads requires knowledge of complex strategy. If you lack experience trading option spreads, or if you are seeking option spread recommendations for actual trades, call Chuck Hughes today at (866) 661-5664 or click below to start trading option spreads for income!

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Chuck Hughes Can Provide You with Option Spread Trading Strategies

When entering the options trading market, it’s important to seek help from an experienced options trading strategist. Option spread trading requires in-depth option spread strategies. An experienced trader can help minimize your risk of loss and maximize your potential for profit.

Chuck Hughes has been trading options since 1986. He has personal experience in trading options and providing professional advice to a whole spectrum of traders; beginners hoping to get into the option spread market and successful traders looking to gain that extra edge. Chuck Hughes is familiar with the options trading market, successful as a trader in the market, and is experienced in trading option spreads.

Chuck is an ten-time Trader and has won more awards than anyone else in World Trading Champion history. He started out trading in the options market with only $4,600 in his account. In his first two years of trading options, Chuck made over $460,000 in profits.

Trade Options with Chuck HughesChuck’s average profit-per trade is 235.9%. Overall, 94-100% of his trades have made a profit. Chuck has done this all by using a trading system that he developed himself.

Trading option spreads can be time-consuming and frustrating- especially if you’re new to the options trading market. Using Chuck Hughes as your option spread strategist can lower your risk for loss and increase your chances for profit.

What are the Benefits of Option Spreads?

An outright trade involves a single contract in a single month, with a single expiration date. An option spread can involve multiple time periods and contracts, different strike prices, and various put and call dates. It’s easy to see how option spreads can become very confusing; even to experienced traders.

However, for all of the complexity of option spreads, there is a large upside to using this strategy to trade. Option spreads provide flexibility and power. For the same amount of risk as an outright option trade, an option spread can statistically increase a chance of profit.

The benefits of option spreads make the strategic investment worthwhile. However, novice traders oftentimes overlook important insights into option spreads. Many people feel uncomfortable trading option spreads because of the intricacy involved in this type of trade.

By using Chuck Hughes’ trading strategies, you can learn option trading strategies. Chuck Hughes will even give you option spread trade recommendations so you can forego the time-consuming research.

Is There Risk Involved in Trading Option Spreads?

The risk of option spreads should be calculated using ‘The Greeks’. The Greeks are a set of terms used to calculate different forms of risk: delta, gamma, vega, and theta. These terms should be used to help calculate the risk of option trading strategies.

Delta and gamma measure the movement of stock prices. Delta is represented as either long or short. Vega measures the volatility of the stock. Vega is also represented as either long or short. Theta measures time decay. Theta is represented as either positive or negative.

There is risk associated with trading option spreads. To reduce your risk of loss, get advice from an option spread trader who has both experience and success in the market.

What are the Different Option Spread Trading Strategies?

There are multiple option spread strategies. Each strategy is designed for different markets (bullish, bearish, or neutral) by using different methods. Option spread strategies include calendar spreads, horizontal, vertical and diagonal spreads, and credit and debit spreads.

Learn about Option SpreadsOption spread strategies vary in their use of option contracts; known as legs. Option spreads typically have two legs, but they can have more. Option spread legs correspond with time variations of calls and puts; either long or short strikes.

Each type of option spread is unique in its risk and ROI (return on investment) potential. They all require intricate strategy in order to minimize risk and maximize profit potential.

Calendar Spread Option Strategy

The calendar spread is designed to capitalize on time decay. All options involved in a calendar spread will be identical in their underlying stock and have the option to have the same strike price. However, they will all have different expiration dates.

Typically, long calendar spreads provide lower risk trading opportunities. Calendar spreads decline in value if their underlying stock either greatly appreciates or greatly depreciates.

Horizontal Spread Option Strategy

A horizontal spread is a type of calendar spread because it is based upon the value of time decay. Its spread will hold the same strikes but its legs will buy and sell at different times and across different time periods. Potential for profit and risk of loss is different for a horizontal spread versus a vertical spread.

Vertical Spread Option Strategy

A vertical spread involves a spread of options that are bought and sold at the same time. All of the options in the spread are the same type and have the same expiration date. However, they all have different strike prices.

A vertical call spread is typically associated with lesser risk. The amount of profit gained by a vertical option spread is determined by how great the difference is between the option premiums of the two positions taken.

Diagonal Spread Option Strategy

A diagonal spread is a combination of a horizontal spread and a vertical spread. The horizontal aspect of the diagonal spread has to do with the differentiation in expiration dates. The vertical spread aspect has to do with the differentiation in strike prices. This means a diagonal option spread has two of the same type of options which both take a long and short position, but they have different strike prices and different expiration dates.

Credit Spread Option Strategy

A credit spread is also known as a credit risk option. The strategy taken involves buying the same type of underlying stock or security. However, they are bought at different strike prices; one option is sold high and one option bought low. Profiting from a credit spread is dependent upon whether the spread narrows.

There are multiple types of credit spreads. Popular strategic credit spread options involve short butterflies, short condors, iron condors and iron butterflies.

Debit Spread Option Strategy

A debit spread involves two options with the same underlying security and same strike prices; but with different market prices. One option is sold low and one option is bought high. Profiting from the trade is dependent upon whether the spread widens. A debit spread always involves an initial loss. However, the trader is betting on the fact that the highly priced purchased option will continue to rise in price.

Become a More Successful Option Spread Trader with Chuck Hughes

Start Option Spread TradingOption spread trading is a complex strategy in the options trading market. With the large amount of different types of option spreads available, it’s important to use and to understand option spread strategies.

If you are new to the options trading market, it’s important to learn how to trade option spreads from an experienced, professional and successful option spread trader.

Even if you understand one option spread strategy, it’s wise to invest in education for other methods. Each strategy is designed to be used in unique market situations and each offers different risk and profit potential.

The fastest way to increase your chance of profit is to use a professional investment trading strategy. By using Chuck Hughes’ options trading strategy, you can receive actual trade recommendations.

You’ll not only be learning the trade but gaining investment tips and strategy from a world-renown options trader. Chuck Hughes is an experienced and successful options trader. With Chuck Hughes’ help, you can lower your risk for loss and increase your chances for profit when you trade option spreads.

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 you 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
  • 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:

  •     •    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. 

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 a​ 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.

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