In today’s post, I am going to talk about how I made $5 doing debit spreads. Some of you may be asking “why are you writing about making only $5” and my answer is because I barely started doing it and want to talk about my first-time experience. Plus this blog is geared towards people that are wanting to learn about the beginner side to things and making small bets that make me this kind of money is exciting.
Before you start getting interested and hop in on debit spreads, the first thing to do is research. watch videos and read other blogs that deep dive into spreads. If you find this blog post helpful then consider sending it to a friend.
What Is Debit Spreads?
Investopedia came in clutch with a good definition. it says,
A debit spread, or a net debit spread, is an option strategy involving the simultaneous buying and selling of options of the same class with different prices requiring a net outflow of cash. The result is a net debit to the trading account.https://www.investopedia.com/terms/d/debitspread.asp#:~:text=A%20debit%20spread%2C%20or%20a,debit%20to%20the%20trading%20account.
The concept can be a bit confusing when you first start learning about it but you’ll catch on once you start making trades.
My Debit Spread Trade
I started my second go with a call debit spread on $SPY. It cost me $0.55 ($55) to hold a spread of $340 and $341. What’s nice about playing $SPY is that it has multiple expiration dates for contracts in a single week. Not all of your trades are going to win but you will be able to make some little cash.
I bought that trade on the 6th of October and sold it the next day for $0.60. That comes out to a total of $5 in profit. Even though that doesn’t seem like a big win at all, I still see it as a successful spread. Like I’ve said above, I’m playing small bets so the gains are not going to be insane.
What I’ve Learned So Far
I will tell you right now that debit spreads in my opinion are a safer way to make bets compared to playing option calls. With debit spreads, your gains are capped and the same for losses (meaning you can’t lose unlimited).
My move with doing debit spreads is to make a few extra dollars to reinvest into other stocks (Dividends, growth stocks, etc). Like I said above, if you want to start doing debit spreads I suggest that you pick stocks that have a steady growth of going up and have a high trade volume. The next thing to do is research and watch videos before you start using your money.
I hope that you found interest in my blog and will continue to support The Finance Starter! I am happy to know that a total of 16,217 Readers have come to my site since I started writing. I plan to 10x that number within 2 months.
And for those wondering how much money I am making on this website, I have made a total of $10. I will be writing a blog post about that soon.