Option Millionaires

[jence]

Vertical spreads you have credit and debit spreads and bullish or bearish.
Ex. BIDU currently at 115 and you feel the price will not go below 110. You could sell the 110 call and receive the credit for writing the contract and you would buy the 105 call to minimize your loss. You are not naked because you hold options to buy the 105. On the other hand you feel the stock will not rise above 120 you would sell the 120 put strike and buy the 125 put. Again receiving a credit for writing the put and covering by buying the 125 put.

On a debit spread you are basically buying a call or put and minimizing the amount of money you have to put up front by selling a contract further away from the strike you purchased.

Hope this helps.
Chris

Hopefully this is not choppy, typing on my iPad. Lol