One of the most basic option trading strategies is to sell a credit spread.  This is usually done whenever the trader has an opinion on a stock or other underlying issue that it is going to go up or down in price, in a certain period. For instance, let’s suppose APPL was trading at $106 per share and you thought that APPL would stay above 100 for the next few months, you might sell the December APPL 100 Put and then buy the December 90 Put; thereby creating a credit spread, because the 100 Put you sold would be more valuable than the one that you bought at 90. As long as APPL stays above 100, the duration of the trade, that is until December expiration, you will be profitable . You have time decay on your side in this trade, that is, it’s positive theta. Each day that passes by, the short you sold is worth a little bit less in time value. This is how you make your profit over time. Often the difficult part of this type of strategy is the management plan. What do I do if APPL does drop in price towards our below $100? […]