Understanding whether a trade is a debit trade or a credit trade is essential for managing risk and strategy in Options Auto Trader. This guide explains how to identify the trade type based on its structure and how to calculate it manually.
Credit Trade (Net Seller)
You receive money when opening the trade.
Example: Selling options like naked puts, credit spreads, and iron condors.
Debit Trade (Net Buyer)
You pay money to open the trade.
Example: Buying options like long calls, long puts, and debit spreads.
When setting up a bot or reviewing an existing trade, the trade type depends on the strategy. Here’s a breakdown:
Credit Trades:
Selling Naked Puts
Selling Naked Calls
Credit Spreads
Iron Condors
Iron Butterflies
Ratio Spreads (unless structured differently)
Strangles (selling both a call and a put)
Short Straddles
1-1-1 & 1-1-2 Trades
Debit Trades:
Buying Naked Calls or Naked Puts
Debit Spreads
Butterfly Spreads (most setups)
Long Straddles
If you want to manually determine whether a trade is a credit or debit, follow these steps:
Go to the trade you want to check.
Open the trade details: Click the three-line menu (hamburger menu) to access trade leg details.
Identify the trade legs and note the following:
Trade price for each leg.
Quantity of contracts for each leg.
Perform the calculation:
Multiply trade price × quantity for each leg.
Add all results together.
Analyze the result:
If the total is negative (-) → It’s a credit trade (you receive money).
If the total is positive (+) → It’s a debit trade (you pay money).
Let’s analyze a 120 DTE strangle trade:
|
|
| Trade LegTrade PriceQuantityCalculation |
Leg 1 | $8.25 | -1 | $8.25 × (-1) = -8.25 |
Leg 2 | $42.25 | -1 | $42.25 × (-1) = -42.25 |
Total |
|
| -50.50 (Negative = Credit Trade) |
Since the result is negative (-50.50), this is a credit trade.
If the total had been positive, it would be a debit trade.
To determine if a trade is debit or credit:
Check the strategy type (credit/debit strategy list). Use trade details to calculate the trade sum. Negative total = Credit trade, Positive total = Debit trade.
This method ensures you always know whether you're paying or receiving money when entering a trade.
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