Credit Spread vs Debit Spread Explained

The Automated Trading Podcast by Advanced AutoTrades

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This episode provides a detailed comparison between credit spreads and debit spreads, which are defined-risk options strategies used by traders, particularly on SPX and SPY indices. It explains that a credit spread involves receiving a net premium upfront and profits when the market remains stable or moves slowly, capitalising on theta (time decay). Conversely, a debit spread requires paying a premium upfront and aims to profit from a strong directional move in the underlying asset, often performing better in low implied volatility environments. The hosts comprehensively cover the mechanics, calculation of max profit/loss, appropriate market conditions, and the pros and cons of employing each strategy, concluding that the choice depends entirely on the trader's market outlook and volatility expectations. Read the full article: https://advancedautotrades.com/credit-spread-vs-debit-spread/

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