QQQ Call Debit Spread (LIVE Closing Trade)

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Call debit spread: In this video, we’re going to go through our closing trade for our vertical call debit spread in the Qs. This is a trade that we made a little while ago back on 3/18. We’ve been in this trade about 11 days. And we had originally made this trade because we wanted some directional exposure to possibly the market moving higher.

We initially entered this call debit spread in the Qs, bought the 107s, sold the 109s, did three of those contracts, paid $1 for each of those; they’re now trading at 130. Now, if you take a look at our “when to exit” guide that we have in the membership area, we usually like to get out of put debit spreads and put credit spreads at a 25% gain, so whenever the value of these contracts overall go up by 25%.

If we paid $1 for them, that means that we’d likely try to get out of these when they’re worth about 125. Well, right now, these are trading for 130 all over. In this case, we can get out of them and make some nice money.

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If we look at where the Q’s are right now, you can see the reason that we’re making money on this trade is that we had a nice little breakout in the Qs as the market moves higher. That's exactly what we wanted, so let’s not assume that the market is going to stop here or reverse. We want to take money off the table and take these trades off whenever we have an opportunity to bank a little bit of profit.

In this case, we’re just going to right-click on order, go over to create closing order, sell these things. We’re going to stretch here and try to get 131. That's where the market is trading. It’s about 130, 131. We’re going to hit confirm and send, try to get out of all of those contracts. I don't it'll take us too long to get out of those contracts.

We’re going to stretch as far as pricing like I said. The market is trading right at a price, but it’s just the matter of getting three buyers on the other side to get rid of these for us and exit. We’ll pause this video, come back here in a little bit, and see if we could get a fill.

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Well, and it looks like we got filled actually on those almost immediately before I paused the video. And it says now that we’re out of those three contracts that we have in the Qs. That banked about a quick $100 profit. In an of couple days, we did get the credit of 131 that we were shooting for. I didn’t think it would take too long.

Sometimes it's worth trying to bid a little bit higher than the market is trading at, see if it can stretch somebody else into paying a little bit more, especially when the market is rallying like this. You don't ever want to be in a frantic state to close these out. This trade is working in the direction that the markets rally, so let’s use that to our advantage.

And we got a little bit better pricing on the exit. As always, I hope you guys enjoy these videos. If you have any comments or questions, please ask them right below. And until next time, happy trading!

About The Author

Kirk Du Plessis

Kirk founded Option Alpha in early 2007 and currently serves as the Head Trader. In 2018, Option Alpha hit the Inc. 500 list at #215 as one of the fastest growing private companies in the US. Formerly an Investment Banker in the Mergers and Acquisitions Group for Deutsche Bank in New York and REIT Analyst for BB&T Capital Markets in Washington D.C., he's a Full-time Options Trader and Real Estate Investor. He's been interviewed on dozens of investing websites/podcasts and he's been seen in Barron’s Magazine, SmartMoney, and various other financial publications. Kirk currently lives in Pennsylvania (USA) with his beautiful wife and three children.