HOW TO OPEN A VERTICAL SPREAD ORDER

STEP BY STEP TO OPEN A BULL CALL VERTICAL SPREAD

http://www.TastyWorks.com

Example: BULL CALL SPREAD

Starbucks has opened upscale coffee cafes, “Reserve Café”.
You believe Starbucks stock will go up and want to
place an order for a Bull Call Spread option.

1. Open TDAmeritrade account to do your research.
2. Insert SBUX in “search”(upper right corner)
3. Fill-in-the-blanks on Bull Call Strategy Template.
4. The price of Starbucks is $56.13.

5. Open SBUX Option Chain in TDAmeritrade.

6. Select Expiration Date at 50 – 120 days away, and
with the largest Open Interest (i.e.Jan. 15, 2019)

7. Select Bid/Sell CALL option column
A. In-the-Money
B. BID/SELL strike price @ ONE notch BELOW
stock price of $56.13 = $55.00 (premium of $3.15)

8. Select Ask/Buy CALL option
A. In-the-money.
B. ASK/BUY strike price @ ONE notch BELOW $55.00
Bid/Sell strike price = $52.50, Premium – $4.95

9. How much premium do you have to pay?
($4.95 less $3.15 = $1.80 X 100 shares = $180.00)

10. Summary:
1. You are Buying(Ask) a Call @ $4.95 Ask premium price
2. “Financing” it by Selling (Bid) of $3.15 Bid premium price
3. PLUS paying $1.80 of your own money upfront (a Debit premium)

YOU ARE READY TO PLACE THE STARBUCKS
Bull Call Spread order:
1. Open TastyWorks Web Browser trading platform:
2. Insert SBUX stock symbol – ENTER!

 

 

3. Click on “Strategies” (drop down menu)
A. Select “Vertical”
B. Select “Long Call Vertical” – GO!

4. Click on “Table”
5. Click on “Expirations” plus or minus key
(bottom in middle) to find expiration date option chain you want.

6. Click on “Curve” (green and red balloons come up)
7. Move Green “BUY” balloon strike price to $52.50.
8. Move Red “Sell” balloon strike price to $55.00

9. On the lower left is a summary of “balloons”.
A. Insert number of contracts
(remember: one contract is 100 shares)
B. Let’s order 2 SBUX contracts.

Summary:

“Buy/Open – 2 – Jun 15 – 134d – 52.5 C – 4.95”
“Sell/Bid – 2 – Jun 15 – 134d – 55 – C – 3.15”

10. Lower, middle, is Premium (the amount you have to pay)
This amount will be a MID price premium of $1.70
(computer program calculation – your calculation is $1.80)
I usually accept the MID price.

11. Click “Review and Send”
A. Order “type” will be : “Net Debit $1.70”
B. “TIF” – Time In Force: always select “DAY”.
C. “Est. Cost”: $340.00 ($1.70 X 100 = $170 X 2 contracts = $340)

12. BEFORE “SEND” ! Write down information shown in
“Review and Send” on the following form:
(Info will disappear when you
click Send)

OPEN: Date:_________Expire:_________
Ask/Buy $______@$______
Bid/Sell$______@ $______
Equals $____
Mid$_____
___Contracts
Max Profit$_______
Max Loss$_______
Type: Net Debit____TIF: DAY Est.Cost: Debit $______

 

13. If everything looks okay: SEND

14. You have a “Working Order” (W), pending the Opening Bell
next day of the Options Market.

15. If order goes through, it will have a “Filled” (F) notation

16. Confirmation of “Filled” order:
A. Open TastyWorks/Home
B. My Account — Transactions –Print.

 

 

Please scroll way down to: ” How to Calculate Vertical
Spread Profit and Loss.”

 

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