20 - Is Trading Naked Really More Risky?
The Trade Busters
00:00
Credit Spreads Are Just Leverage, Right?
The way i think about it is, you are leveraged, essentially, ten x exposure to that underlying right, with your ten credit spreads. So whereas, instead of losing a hundred dollars, if the stock moves from ten to nine, you're going to lose the entire thousand dollars, right? Because if that stock goes from ten to 9, you've lost a hundred dollars times ten, because of the ten contracts. The issue is that newer traders typically start with larg or smaller accounts, which means they have to do credit spreads for that capital efficiency,. but they don't quite understand the risk.
Transcript
Play full episode
