To generate consistent cash-flow from the trading markets with out having to ‚guess‘ or know near term market direction, there are a variety of different option techniques that option investors can use.

Some of these different strategies include the calendar spread, the butterfly spread, the diagonal spread, the iron condor, and the Vertical Spread, also known as the Credit Spread.

The vertical spread (or credit spread) is a foundational trade that can be found in many other option income strategies. The iron condor spread is in actuality just two vertical spreads placed on either side of where the market is trading.

Also take a look at the butterfly. This strategy is comprised of verticals as well. One in the upper half of the position and one in the lower half. Also the iron butterfly is made up of two credit – or vertical spreads. A put vertical and a call vertical – both sold at a credit.

These positions can be constructed using either call options as well as put options. These may have different names attached to them to help differentiate them – such as bull put spread, bear call spread, etc – however – they are all vertical spreads.

Here is a hypothetical example of a bear call vertical spread…

Sell 1 ABC Stock 75 Put Option Buy 1 ABC Stock 70 Put Option

Again, this vertical spread is a bullish position – where the opinion of the option seller is that ABC will be moving higher over the shorter term, or staying put in it’s general area on the price chart.

This position is called a bull put spread due to the fact that even though the position is created using put options, it is being placed in such a way that generates a profit if and when the stock being used moves bullishly.

As long as the outlook on this trade is correct and RIMM stays where it is at or heads downwards, this trade will ‚win‘ and the initial credit received when the trade was first placed will become the profit.

Want to find out more about how to trade the Vertical Spread for monthly income, then visit Ted Nino’s site on how to trade this strategy as well as the Credit Spread for monthly cashflow.