Exiting Debit Spreads When a debit spread trade is entered, you are spending money to enter into that trade. The money spent is the net amount of the trade based on buying a call or put contract at one strike price, and then selling a call or put contract at another strike price. The option contract that you buy is going to cost more than the option contract that you sold, so the net effect is a cost to you. However, the cost to buy the option contract has been […]

In the money options refer to options that have intrinsic value. Another way to think of intrinsic value is the value of the option at expiration time or the value of the option if you were to exercise it right now. Out of the money options have no intrinsic value or would have no value if you were to exercise right now. There are pros and cons of buying ITM vs OTM options. As you go deeper in the money, options behave more and more like the stock, where a […]