Save 15% on H&R Block At Home Products Deluxe



How to defend Call Credit Spreads explained by the best trader

 
 

How to defend a credit call spread? Tom Sosnoff and his daughter Case explains how to defend a call spread which goes against you.

Interesting explanation of what should a trader do if a credit spread goes against you. With Tom’s view, everything I have ever done to defend my spreads was wrong.

Here is an example of what a trader can do (excerpt from the video above):
 

We have a stock XYZ is trading for $50.

We sell 55/57.5 call spread (55 strike being the short) with 45 days to expiration (DTE) and collected 0.80 (or $80) premium. Here are a few scenarios what you should do:
 

XYZ is now trading for $52.5 with 29 DTEleave it

XYZ is now trading for $55.0 with 29 DTEleave it

XYZ is now trading for $56.0 with 29 DTEleave it

XYZ is now trading for $57.5 with 29 DTEleave it

XYZ is now trading for $59.5 with 29 DTEleave it
 

And now, here is a different situation:
 

XYZ is now trading for $55.0 with 7 DTEroll it into the next month

XYZ is now trading for $56.0 with 7 DTEroll it into the next month

XYZ is now trading for $57.5 with 7 DTEroll it into the next month

XYZ is now trading for $60.0 with 7 DTEleave it and hope for a miracle that the trade may return back before expiration, and if not, take the full loss.
 
 





Leave a Reply

Your email address will not be published. Required fields are marked *