I'm feeling worst than
Don't feel so bad. Your day can't possibly be worse than mine. I never intended to carry all that risk, but it just snowballed. I always knew the importance of stop losses, but I didn't have the discipline. The bigger loss I had, the more I wanted to make some back, but it just hit me like a train. I don't know why I am writing this. Trading is hard. Losing money is even harder. I am in a world of misery. I feel like putting a gun to my head. Hope none of you experience this. :(
Maybe this will help.
Entering Option Trades� And a look at one exotic spread
by Richard N. Croft
Talking about the mechanics of an option strategy can be difficult enough. How about a discussion that relates to how one actually implements a position in the real world.
For example, say you want to implement a covered call write on XYZ. Further let�s assume that XYZ is trading at $50.00 per share and the January 55 call is trading at $5.00 per share. Ideally you want to buy the stock at $50.00 and write the January 55 call at $5.00. The problem is trying to execute two separate trades one leg at a time.
The solution is not to try. What you want to do is enter a buy-write order with a net debit. Let the traders at the brokerage firm decide how to implement the order. In the XYZ example, you would request a buy write where you are willing to buy the stock and write the call at a net debit of $45.00 per share. It doesn�t matter if you pay $50.25 to buy XYZ, as long as you receive $5.25 from the sale of the January 55 call.
Most brokerage firms will do these kinds of trades, and some will even enter spread orders as a spread. Sometimes charging a little less on the overall spread than would be the case if you legged into it one side at a time.
But it�s important to note, that any trade involving two sides should be implemented as a net position. Which obviously holds for spreads, which can be net debit or credit positions. Say you want to implement a bull call spread on XYZ. The XYZ January 45 call is trading at $9.50 per share, and the XYZ January 55 call is trading at $5.00. You could buy the XYZ January 45 call and write the XYZ January 55 call for a net debit of for a net debit of $4.50. Enter the order then as a spread with a net debit.
Credit spreads are the same. If you were bearish on XYZ you could write the XYZ January 45 call and buy the XYZ January 55 call for a net credit of $4.50 per share. Again, enter the order for as a bear call spread with a net credit.
When you fill the form for a complex trade like a buy/write where you buy the stock and sell a call on it you have an option to do it a market price or to do it with a *net debit amount,which is the amount you paid for the stock minus the amount you recieved proceeds from the call.
I look at it this way. If When you sell the option at the same time that you buy it does not cover the price of your premium it is a debit. If it covers it an puts money in your account it is a credit.
Or, if you selling a strike that is more in the money than you bought it is a credit if you sell more out of the money strike price it is a debit
From last night, I was away after 6 PM:
Another way to understand the debit vs credit spread:
The two options strike contracts cost different amounts, You either owe them (debit spread) or they owe you (credit spread) the difference, based on the current price. No need to confuse with info about direction, calls, puts and current stock price.
1)when you sell the higher strike price and buy lower strike then it is a credit spread.
2) When you sell lower strike and buy higher stike it is a debit spread.
Calls: Exact opposite of puts
1) when you sell the higher strike price and buy lower strike then it is a debit spread.
2) When you sell lower strike and buy higher stike it is a credit spread.