If you want to start trading options there are lots of option strategies that you can choose. The two basic option strategies are call option and put option. They give you the right to buy or sell an asset at a specific price which we called strike price before the contract expires or before its expiration date. Using those two options you can create many different strategies like option spread. Option spread is created by simultaneously buying and selling option.

Since the option has different strike price and expiration date, you can construct three types of option spread: vertical spread, horizontal spread and diagonal spread. Vertical spread is created by buying and writing option on the same stock and expiration date but different strike price. Horizontal spread is created by buying and writing option on the same stock and strike price but different expiration strike. Diagonal spread is created by buying and writing option on the same stock but different strike price and expiration date.

By buying option you are spending money for the option premium. If you write option you will get premium. If the premium you pay is higher than the premium you receive it is called debit spread. But if the premium you receive is higher than the premium you pay it is called credit spread.

Both credit spread and debit spread has limited profit and limited risk. They are used to generate monthly income. I have several tips for you if you want to trade with credit spread:

• 
  When opening a position you need to use spread order so you can buy and write option at the same time. It is possible that the price move a lot in seconds if something is happening. By using spread order your spread will work according to your plan. A good option broker will have this feature on their trading platform.
  
• 
  Liquidity is important in trading option. Good liquidity means you can get the best price. You can see the liquidity from open interest and daily volume. Higher number means more liquid. The options should have at least several hundred options traded daily.
  
• 
  If you use calendar spread then you need to make sure that the stock does not fluctuate much. Do not choose volatile industry like commodity or technology companies. You should also avoid trading near the earning release. That will affect the price very much. If you done that, you will have lower your risk.