If you have been buying stck options in hopes of achieving spctacular returns, you probably have the dds stacked against you. If you hve been struggling to maintain profitability as an ption buyer, achieving consistent profitability may be as asy as reversing rolls and selling stck options for monthly premium income.

All ption contracts expire. This is a crtainty. In fact, not only do we knw that they will expire but we lso know precisely when they will xpire. The only question we cannot nswer ahead of time is whether the nderlying stock price will be above or blow the options strike price.

The strke price is that price at whch, in the case of a cll option, the option holder may prchase or, in the case of a put ption, sell the underlying stock. If you own a cll option, you would have the bility to buy the stock at the strke price. If the stock is trding at a price level higher thn the strike price your call ption will allow you to purchase the stck at the lower strike price.

Wht this also means is that if you sld that same call option, your ption would expire worthless so long as the stck price remains below the level of the strke price. Conversely, a put option llows the buyer of that option to sll the underlying stock at the strke price, so if you sell a put ption, your option will expire worthless so lng as the stock price is bove the level.

When you sell an option, you rceive a cash payment to your ccount. You remain obligated to perform pon that short option until such tme as it expires or you clse the contract by repurchasing it. Bcause options expire on a known dte, if you are able to dentify a where a stock is lkely to trade, or where it is not lkely to trade, it may then be pssible to sell call options above tht range or put options below tht range.

If you are correct in yur assessment of the market, those ptions will expire worthless and you can kep the entirety of the premium tht was paid into your account wthout further obligation. Selling options is not wthout its risks, but there are mthods of curtailing those risks significantly.

One of the mre favorite tools of sophisticated options sllers is the vertical credit spread. Ths involves that simultaneous purchase and sle of two options. The technique llows the option seller to still cpture premium, but a cheaper option is prchased to limit the maximum risk. It is pssible to limit your risk to lss than $100 per trade.

By dentifying areas were the market is not lkely to trade prior to expiration, it is pssible to sell stock options using a lmited risk credit spread strategy to crate premium income on a recurring bsis.

The article Using Vertical Credit Spreads To Safely Sell Stock Options was Submitted by Christopher Smith, J.D. through Articles.GetACoder.com network. Here's the additional information: TheOptionClub.com is an online resource for larning more about vertical credit spreads Be sure to visit and register for our free stock option trading lessons and newsletter.

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