I used a combination of both Option Buying and Option Selling to maximize my returns. I’m more aligned to Option selling since it has room for errors. But in case of Option buying, I would look only for A+ setups.
Most of them knows what is Option buying. But Credit Spreads?
Credit spreads, also known as vertical spreads, are options trading strategies that involve buying and selling two options contracts with different strike prices but the same expiration date.
Unlike convoluted strategies, credit spreads offer a straightforward and controlled approach to generating steady income while managing risk.
Below is the breakdown of all my trades:
Risks with Weekly Credit Spreads:
The issue with weekly credit spreads is that everybody likes the fast pace weekly profits of weekly credit spreads until they take a loss.
The weekly credit spread game is that there are many, many small profits and the losses are ALWAYS larger than the gains. That is risk curve of weekly credit spreads.
Although, when a loss occurs, retail traders become flabbergasted.
But what if you take only A+ setups? If you check my journal, I have taken only 3 credit spreads and rest are all Long Call/Put.
How did I achieve it a win rate of 100% in Credit Spreads?
I take only A+ setups and I have discussed in DETAIL in my ebook on Secrets of Credit Spreads which covers the below topics,
- What is Credit Spread?
- How to place Credit Spreads?
- Strike Selection Techniques using Basic Statistics
- How I read Charts for Sentiment Analysis — Information from the famous book worth $89 in market today
- How to measure Volatility?
- Powerful Strategies I use to build spreads
- What is my ideal trading system? Entries, Exits, Stop Loss, Confirmation Signals, Indicators I use etc.
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Trading in bull market is easy that even a grandma can make an 8% return per annum. What if I say, I used the same strategies to make 65% in 2022 when the S&P 500 was down -23% in BEAR MARKET!
The Bottom Line
Credit spreads are a popular way to generate income from options.
Unlike covered calls, credit spreads do not require an upfront investment in long stocks and have a limited potential for loss. Like covered calls, the strategy has limited upside potential. Many option traders begin with covered calls and then look for more complex strategies.
Although credit spreads are a common next step, many of these same investors find themselves back at covered calls because of their simplicity and consistent income.