Option Trading or options trading is a term used in trading of the stock options in an exchange. Options Trading implies that you trade the options offered on these stocks, instead of trading stocks. Therefore, there is no need for you to own the underlying stock so that you can trade options. In this field, there are two types of options, namely the call options and put options. If you can creatively utilize both, you have great chances of attaining almost unlimited mixture of potential option strategies. With great strategies for options trading, you can profit from both types, even if the underlying stock is flat.
As an option trader, there is no need for you to employ the buying low and selling high tactics just to generate profits when a trade is closed out. Instead, there are still so many ways to earn money through certain types of spread trades.
A new type of spread trade is the ‘bear call credit spread’; this kind of option trade is able to generate net income in the beginning of the trade; with things going smoothly, this also permits the trader to maintain and keep all net proceeds until the options run out.
What exactly is bear call credit spread? This option trading term is in fact an appealing and accurate explanation of this fairly simple trade. Dissecting every word would give Bear implying a bearish stance; meaning that the stock is becoming low until the end of the trade. Next is the Call, which is a usually called call option, used in taking the position in contrast to put options. The credit word stands for the generation of net income through trade when it is started. Lastly, the Spread implies that trading is taking a stand between the two strike prices where in the difference between the two strike prices is the spread.
Putting all the words together, bear call credit spreads are seeking ways to generate income through the bearish charts. While the spread part might limit the total income as it limits the total risk. Generation of income is possible when there is/are call option/s sold for a higher price compared to the price wherein the call option is acquired. The net difference between the prices is the credit, which is usually not free from risk.
In this option, never let small losses become big losses. To avoid it, choose wisely the right stock before entering the trade.
Jeff Ziegler, author of this article is also interested in Credit spread options and recommends you to please check out some Credit spread strategies if you liked reading this information.
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