Video: How Trading Options Makes Me $9,886/Month
Creator: Etienne Crete – Desire To TRADE
Original Video: Watch the original video
Difficulty: Advanced
The Big Idea
Selling an option can bring cash into the account without requiring an immediate favorable move in the underlying stock. That cash is compensation for an obligation, not instant profit. Pairing the short option with a protective long option changes the exposure into a spread with a defined expiration payoff under stated assumptions.
If you remember one thing: evaluate the net credit, maximum loss, management rules, and portfolio exposure together. The premium received is only one side of the trade.
The Source’s Main Trade Is a Bear Call Spread
The lesson begins with a bearish stock-chart idea and translates it into selling a call above the current price. It then buys a higher-strike call to limit upside exposure. That combination is a bear call credit spread: short the lower-strike call and long the higher-strike call, with the same underlying and expiration.
The protective call costs money, reducing the original short-call premium. The amount available as maximum spread profit is the net credit after paying for that protection, before costs. A large premium quoted for the short leg alone is not the spread’s income.
The source’s reported monthly earnings do not establish an expected income for another account. The supplied transcript does not give a complete trade ledger, account equity history, drawdowns, correlated exposure, or all implementation rules. Its chart-direction alert is also not specified well enough to reproduce as a complete system.
Premium Received and Profit Earned Are Different
If a spread opens for a $1.00 net credit, that cash inflow accompanies an obligation whose value changes. If buying back the spread later costs $2.20, closing it produces a $1.20 loss per share-equivalent before fees. Receiving cash first has not prevented a loss.
At unchanged stock price, a short stock position does not automatically lose a large amount from price movement alone; financing and other costs are separate. Likewise, an option spread does not automatically become profitable just because the underlying stays flat briefly. Time remaining, implied volatility, and the spread’s current value all matter before expiration.
The insurance analogy can help explain receiving compensation for taking risk. It does not establish that the risk is well priced, independent across positions, or adequately capitalized. You still need a reason to believe the credit is sufficient for the losses and costs the process can produce.
Worked Example: A Five-Point-Wide Call Spread
Use an invented same-expiration pair: sell one $400 call for $8.40 and buy one $405 call for $7.40. Net credit is $1.00 per share-equivalent. Assuming a standard unadjusted U.S. equity-option multiplier of 100, that is $100 before costs.
The spread width is $5.00. Maximum expiration profit is the $100 credit. Maximum expiration loss is ($5.00 − $1.00) × 100 = $400, assuming the spread remains intact and both legs settle consistently. The expiration breakeven is $401.00.
| Underlying at expiration | Net option obligation per share | Spread P&L before costs |
|---|---|---|
| $395 | $0 | +$100 |
| $400 | $0 | +$100 |
| $401 | $1 | $0 |
| $403 | $3 | −$200 |
| $405 or higher | $5 | −$400 |
These are expiration scenarios, not a prediction of the spread’s price tomorrow. Contract multipliers and deliverables can differ for adjusted contracts and other products, so the transcript’s suggestion that all options always represent 100 shares is too broad.
The Options Industry Council’s bear call spread reference describes the same two-leg structure and its limited expiration payoff. It also discusses assignment and expiration risks; the payoff diagram does not eliminate those operational considerations.
Delta Is Not Your Trade’s Exact Probability of Profit
Delta primarily describes an option’s modeled price sensitivity to a small change in the underlying, with other inputs held constant. Traders sometimes use its magnitude as a rough probability shorthand. It is not an exact real-world probability that the stock will finish beyond the strike, and it is not the same as the probability of touching the strike before expiration.
It also does not directly give the spread’s probability of profit. The spread’s expiration breakeven includes the net credit, while its early-close outcome depends on both legs’ market values and the management rule. A short call labeled 0.20 delta does not by itself establish an 80% success rate for a managed spread.
The OIC’s delta explanation describes its sensitivity role and changing nature. Treat a probability shortcut as a model-dependent input to investigate, rather than a verified frequency for your own trade sample.
High Win Rate Can Hide Unfavorable Payoffs
In a simplified all-or-nothing example that wins $100 or loses $400, the break-even win rate before costs is $400 ÷ ($400 + $100) = 80%. Eight full wins and two full losses produce zero before costs.
If each completed spread has $4 of total costs, the outcomes become +$96 and −$404. The corresponding break-even frequency rises to 404 ÷ 500 = 80.8%. Actual managed spreads can have partial profits and losses, so measure the actual average outcomes rather than substituting this simplified threshold.
This example does not say that every call spread requires an 80% win rate. It shows why the particular $100/$400 payoff cannot be judged solely by calling the chance of a loss low. The average loss can erase several ordinary credits.
Rolling Is a New Decision, Not an Eraser
A roll closes an existing position and opens another, often with a later expiration or different strikes. Keep both transactions visible. For example, collecting $100 initially and paying $220 to close realizes a $120 loss before costs. Opening a new spread for $150 does not turn the old result into a win.
If the new spread ultimately expires with the full credit retained, the combined sequence earns $30 before costs. Before that outcome is known, the new obligation remains open. Record its width, maximum loss, time exposure, and whether the new size differs from the original.
Repeated rolls can extend exposure or increase correlated risk. Additional credit is not automatically a reduction in economic risk. Evaluate the new trade as if it were offered on its own, then calculate the cumulative result of the whole sequence.
Defined Payoff Still Requires Management
American-style short equity options may be assigned before expiration. One leg can become a stock position while the other remains an option. Near expiration, exercise decisions and after-hours movement can complicate the neat two-leg outcome assumed by the table. Follow the broker’s procedures and understand the resulting obligations.
Prepare for earnings, dividends, illiquid quotes, wide spreads, and inability to exit at the displayed midpoint. A smaller quoted probability does not guarantee a small cash requirement during assignment or a cheap exit during a price jump.
The source describes spreading trades across ten to twenty stocks. Count common exposures as well as symbols. Several call spreads on stocks sensitive to the same market surge may lose together. If ten spreads each have $400 contractual maximum loss, their combined nominal maximum is $4,000 before costs, not $400 because each trade seems small.
Write the Management Plan Before Collecting Credit
A useful plan specifies underlying selection, expiration range, strike selection, acceptable bid-ask conditions, maximum total exposure, and what prompts closing or rolling. State whether a profit objective is a fraction of collected credit or a chart condition, and what happens around major events.
The transcript does not fully define these decisions, so this guide does not invent them as the creator’s exact rules. A reproducible research project needs the missing choices and historical option quotes for both legs. An underlying-price chart alone cannot establish premiums, implied volatility, fills, or spread profitability.
Practice and Research
- Payoff worksheet: choose hypothetical strikes, net credit, multiplier, and costs. Calculate expiration P&L below both strikes, between them, and above both. Verify that the maximum loss matches width minus credit.
- Management journal: record opening credit, closing debit, fees, realized P&L, and any new roll separately. Do not report gross credit as earned income.
- Portfolio stress: assume several correlated underlyings rally together. Add intact-spread maximum losses and identify assignment or liquidity complications that the simple sum does not model.
For a historical study, use actual option-chain data and an explicitly defined management rule. Keep entry selection, profit-taking, and rolling comparisons separate, and reserve later observations for evaluation.
Check Your Understanding
What is the maximum expiration loss on a $5-wide spread with a $1 credit and 100 multiplier? $400 before costs under the intact-spread assumptions.
Does 0.20 short-call delta guarantee an 80% profitable-spread frequency? No. Delta, expiration breakeven, and managed-trade profit are different concepts.
Does a roll remove a realized loss? No. It closes one obligation and creates another; the full sequence must be accounted for.
Final Takeaway
Treat premium as compensation for an obligation. A useful options-income process measures net outcomes, tail exposure, and operational risk rather than equating cash received with profit earned.
Risk Disclosure
This material is for education and research, not personalized financial advice or a recommendation to trade any security, contract, or account program. Trading can result in substantial losses. Leveraged products can produce losses beyond the amount initially committed, and short selling can involve unlimited loss. Options carry exercise, assignment, liquidity, and expiration risks. Stops and displayed prices do not guarantee execution; gaps, spreads, slippage, fees, funding, halts, and platform interruptions can materially change outcomes. Hypothetical examples, historical charts, indicators, and creator-reported results do not establish future performance. Understand the instrument, account rules, and total exposure, practice before committing capital, and use only risk capital you can afford to lose.
CandleChasers provides independent educational analysis and is not affiliated with, endorsed by, or sponsored by the source creator, platforms, or firms discussed.