Monday, September 14, 2009

Debit vs Credit

I want to make a point to people that don't understand vertical spreads and what they might be missing.

Below is the risk profile of two trades on the $RUT. Now one is a credit and one is a debit, as humans we prefer to take the credit then pay a debit. But if you notice both have the same risk profile, but the debit will make you more money. The difference is .5 cents, if you did 50 of the debits you would make $250 more then if you did the credits. That's $3000 more each year you could capture if you were to review the difference between the two.

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