For those of you new to trading, a debit spread is a lower risk trade since risk is the amount paid for the spread, or if a credit spread, the maximum risk is the width of the spread minus the amount received.
With debit spreads I will usually go at least a week out and place the long position ITM (In-The-Money) and the short position at least 1-2 points OTM (Out-of-the-Money). The reason for this is because the ITM Long position will theta decay at a slower rate than the short position OTM. Since the market is mathematically designed each point will usually be .50 cents, whereas a 2 point spread will usually cost around $1 leaving a potential $1 profit if it finishes ITM. For these I will usually place a GTC for 1.50 - 1.70 in order to hopefully profit prior to expiration.
As with all trades direction is the most important factor, so trade in the direction of money flow and make sure your indicators agree!
Right now an NVDA 122/124 Aug 23 Call Debit Spread is .98 - 1.00 leaving the potential for $1.00 profit (which would be 100% if closes ITM)?
With debit spreads I will usually go at least a week out and place the long position ITM (In-The-Money) and the short position at least 1-2 points OTM (Out-of-the-Money). The reason for this is because the ITM Long position will theta decay at a slower rate than the short position OTM. Since the market is mathematically designed each point will usually be .50 cents, whereas a 2 point spread will usually cost around $1 leaving a potential $1 profit if it finishes ITM. For these I will usually place a GTC for 1.50 - 1.70 in order to hopefully profit prior to expiration.
As with all trades direction is the most important factor, so trade in the direction of money flow and make sure your indicators agree!
Right now an NVDA 122/124 Aug 23 Call Debit Spread is .98 - 1.00 leaving the potential for $1.00 profit (which would be 100% if closes ITM)?
