How to Create Risk-Free Option Positions

➥ How to Create Risk-Free Options Trades:

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Creating risk-free option positions is a powerful strategy that allows you to remove all risk from profitable trades and reduce your margin requirement to zero.

By creating a risk-free trade, you’ll be able to stay in the trade and allow for the potential of seeing the position become more profitable without watching the position turn into a losing trade.

In this video, I’ll break down how to create risk-free call spread positions using a real TSLA trade I made. I’ll also break down the math of these types of trades so you understand why they become risk-free. Finally, I’ll discuss the pros and cons of using this strategy as opposed to simply closing the trade.

0:00 Introduction
0:39 Normal Bull Call Spread Entries
1:50 “Legging” Into Trades Explained
2:13 TSLA Trade Example
5:10 Risk-Free Trade Math
6:18 Loss Potential and Margin Requirement Go to Zero
9:25 You Need to Take Risk First
10:37 Timing the Second Trade Entry?
15:01 Trading In and Out of the Short Option
18:37 Overall Strategy Benefits

I hope this provides more clarity on creating risk-free call spread positions! I think it’s a phenomenal strategy that gives a lot of trade management flexibility. Most importantly, it removes/reduces your loss potential and allows for more profit potential in the trade at the same time.

Your margin requirement also goes to zero (or positive in which you gain buying power) which allows for allocation to new trades or withdrawal from the account.

Of course, you can always just sell that profitable long call position and exit the trade entirely. If you do want to push for more profits while also taking risk off the table, then this strategy is a great fit for that plan.

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=== Preferred Brokerage ===

I use the tastyworks brokerage platform for my stock/options trading (or simply investing in stocks long-term). Why? They have incredible commission rates for active options traders, free stock trading, and easy-to-use software without overly complex functionality.

➥ Learn More About tastyworks:

➥ Get access to exclusive options content when you open and fund your first tastyworks brokerage account:

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