When trading in an IRA, we often opt for verticals over cash secured options. Why is this and how do we set them up? Tune in to hear Tom and Tony discuss verticals in your IRA!
We like vertical spreads because they have a theoretical high return on capital. When we set up, we must choose between a credit spread and a debit spread.
Credit spreads are composed of an out-of-the-money short option and a further out-of-the-money long option.
Debit spreads are composed of an in-the-money long option and an out-of-the-money short option.
Inenvironments, we often opt for credit spreads. This gives us the largest credit for the spread width, or risk. In low IV Rank environments we like debit spreads due to cheaper options prices and larger proportion of potential profit-to-debit paid.
Tune in to hear Tom and Tony walk through why we set up verticals the way we do!