How to Close a Call Debit Spread on Robinhood
How to Close a Call Debit Spread on Robinhood: A Step-by-Step Guide
A call debit spread, also known as a bull call spread, is an options trading strategy where an investor buys a call option at a lower strike price and simultaneously sells another call option at a higher strike price, both with the same expiration date. This strategy is used when the trader expects a moderate increase in the price of the underlying asset. Once the position has served its purpose or the expiration date nears, closing the trade correctly is essential. Here's how to close a call debit spread using Robinhood.
Step 1: Open the Robinhood App
Launch the Robinhood mobile app or log into your account on the web platform. Navigate to your portfolio and find the options position you want to close. You should see the call debit spread listed under your holdings.
Step 2: Tap Into the Spread Position
Tap on the specific spread position. Robinhood displays it as a multi-leg options strategy. Make sure you’re viewing the full spread and not just one leg of the trade.
Step 3: Select “Close” or “Trade”
Tap on the “Trade” or “Close” button (this varies slightly between app versions). Robinhood will automatically create an order that offsets both legs of your current spread. In this case, it will sell the long call (the one you originally bought) and buy back the short call (the one you originally sold).
Step 4: Set Your Order Type and Price
You can select the type of order you want to place—most commonly, this would be a limit order to control the minimum premium you’ll accept. The app will show the current market price for closing the spread. You can adjust this value if you have a target closing price.
Step 5: Review and Submit
Double-check the order details, including the net credit or debit you’ll receive or pay. If everything looks good, submit the order. Robinhood will notify you when the trade is filled.
Important Tips
- Timing matters: Closing your spread before expiration can help you avoid assignment risk on the short call.
- Monitor liquidity: Illiquid options can lead to wide bid-ask spreads, making it harder to close at a desirable price.
- Know your max gain/loss: If the spread has reached its max potential profit or loss, closing it locks in the result and limits further risk.
By following these steps, you can efficiently close a call debit spread on Robinhood and manage your options positions with more confidence. Would you like a visual walkthrough of this process?
