In this episode Larry and James go over last weeks trades and new positions as well as go over trading vertical spread options strategy. A vertical spread involves buying and writing puts or calls at different strike prices. Each spread has two legs, where one leg is buying an option, and the other leg is writing (selling) an option.
This can result in the option position (containing two legs), giving the trader a credit or debit. A debit spread is when putting on the trade costs money. For example, one option costs $300, but the trader receives $100 from the other position. The net premium cost is a $200 debit.
If the situation were reversed, and the trader receives $300 for putting on an option trade, and the other option costs $100, the two option contracts combine for a net premium credit of $200.
