If you’re getting into options trading, you may have heard about vertical spreads. But should you buy or sell them? The answer is clear: selling premium is almost always the better choice. Why? Because when you sell premium, you get paid upfront and time works in your favor. Let’s break it down in simple terms.
What is a Vertical Spread?
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Debit Spreads (Going Long): You pay money to enter the trade.
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Credit Spreads (Selling Premium): You receive money upfront.
While both strategies can work, selling premium is the smarter move for most traders.
Why Selling Premium is Better Than Buying a Vertical Spread
1. Get Paid Upfront – Cash in Your Pocket
When you sell premium, money is deposited into your account immediately. Instead of hoping the market moves in your favor, you already have a head start. This is a key difference between buying and selling spreads:
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Buying a vertical spread: You pay a premium and need the stock to move a lot to profit.
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Selling a vertical spread: You get paid upfront, and even if the stock barely moves, you can still make money.
Would you rather pay for something and hope it increases in value, or get paid upfront and only lose if things go significantly against you?
2. Sell High, Buy Low – The Smart Way to Trade
Most people think of investing as buy low, sell high, but options trading flips this around. Smart traders sell high and buy low by selling premium.
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When you sell a vertical spread, you receive money upfront (selling high).
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As time passes, the option loses value due to Theta decay (which we’ll cover next).
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If all goes well, you buy it back cheaper or let it expire worthless, keeping the difference as profit (buying low).
This strategy shifts the odds in your favor compared to betting on big price moves.
3. Theta Decay – Your Best Friend
In options trading, Theta represents time decay – how an option loses value as expiration approaches. If you buy a vertical spread, Theta decay works against you. You need the stock to move fast before time runs out.
But if you sell a vertical spread, Theta is your best friend. Even if the stock doesn’t move at all, you still make money as time passes. The option naturally loses value, and since you sold it high, you can buy it back lower or let it expire worthless.
The longer you wait, the more time decay helps you. It’s like renting out a house instead of buying one and hoping its value increases. You collect money over time instead of relying on unpredictable price movements.
4. Higher Probability of Winning Trades
Selling premium gives you a higher probability of success compared to going long on a spread. When you buy a vertical spread, you only make money if the stock moves in your favor before expiration. If it doesn’t, you lose what you paid.
But when you sell a vertical spread:
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The stock can move in your favor, stay the same, or even move slightly against you, and you can still make money.
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You don’t need a huge price move, just for the stock to stay below (calls) or above (puts) a certain level.
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Time works for you, not against you.
Would you rather hope something moves in your favor, or would you rather get paid while waiting for time to do its job?
5. Defined Risk – You Know Your Maximum Loss
Some traders worry about selling options because they’ve heard horror stories of unlimited losses. But with a credit spread, your risk is limited. The maximum loss is the difference between strike prices minus the premium received.
For example, if you sell a $100/$105 call spread and receive a $2 credit:
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Your maximum loss is $3 ($5 difference in strikes – $2 received upfront).
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Your maximum profit is $2 (the premium you collected).
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Time decay works in your favor, increasing your chances of winning.
This makes selling spreads a safer, more predictable strategy than betting on big price moves.
6. Market Moves Are Unpredictable – But Selling Premium Works Anyway
Even experienced traders can’t predict the market with certainty. If you buy a vertical spread, you need the stock to move a lot in a short time to make a profit. But if you sell a vertical spread, you can profit even if the stock barely moves or moves slightly against you.
Selling premium allows you to stack the odds in your favor instead of relying on perfect timing.
When Selling Premium Makes the Most Sense
While selling vertical spreads is a strong strategy, here’s when it works best:
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High probability trades: Choose strike prices with a high chance of expiring worthless.
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Time is on your side: The closer you get to expiration, the faster Theta decay works for you.
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Low implied volatility (IV) environments: When volatility is low, options lose value faster, benefiting premium sellers.
Final Thoughts: Always Sell Premium When Trading Vertical Spreads
If you want to trade smarter and increase your probability of success, selling premium on vertical spreads is the way to go. Instead of buying a spread and hoping the stock moves, you get paid upfront and let Theta decay work for you.
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You collect money right away.
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Time works for you, not against you.
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You have a higher chance of winning than traders who go long.
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Your risk is defined and manageable.
If you’re serious about making money with options trading, start selling premium today. It’s the difference between hoping for profits and putting the odds in your favor.
Are you ready to start selling premium on vertical spreads? Have questions about the strategy? Let us know in the comments!