Vertical Credit Spread – The All around Strategy

For those traders and investors who are looking for a way to benefit from theta combination to having an advantage when it comes to guessing on a stock’s direction then you must consider using vertical credit spreads.

A vertical credit spread is stock options trading strategy that includes the sale of a higher priced option with the purchase of a lower priced option with the same expiration date on a one to one basis.

The advantages that you can get from using vertical credit spreads risk based reduction of buying power, tight markets for liquidity, defined risk and good executions. The break even points are easy to understand as well.

In this strategy, you are able to gain profit when the stock moves in the correct direction that you predicted or when the stock does not move at all.  This makes the vertical credit spread strategy a perfect technique that will give you limited risk and limited return and will be best for traders who want to take advantage of a strong support on the underlying stock and overpriced option premiums.

With a variety of market conditions, vertical credit spreads are attractive as a low cost alternative to selling and buying individual options.