There's a cheat code for trading that people know about
But most people don't know how to use them efficiently...
Here's how I use them to make money even when I'm WRONG: 𧡠(with examples)
But most people don't know how to use them efficiently...
Here's how I use them to make money even when I'm WRONG: 𧡠(with examples)
Credit spreads are a combination of selling and buying options
One massive advantage of them is being able to make money from TIME
One massive advantage of them is being able to make money from TIME
The most important part of spreads are choosing where to put your strikes
Most people get this wrong when playing spreads (I did too at first)
Here's the best way to choose your strikesπ
Most people get this wrong when playing spreads (I did too at first)
Here's the best way to choose your strikesπ
Picking strikes revolves around 1 idea:
Where should the price NOT go
Credit spreads work when you believe price can go anywhere BUT one price area
Here's an example:
Where should the price NOT go
Credit spreads work when you believe price can go anywhere BUT one price area
Here's an example:
Let's say I'm trading a support and resistance strategy on $TTD
I see the price bouncing off support.
My trade thesis is that support will hold and price shouldn't go below $40
I enter a credit spread when price is around $48
My trade thesis is that support will hold and price shouldn't go below $40
I enter a credit spread when price is around $48
Where should I get my strikes?
You want to get your strikes as close to your stop loss as possible
In this case, I want my stop loss right under support
I'd sell the 39 puts and buy the 38 puts for a credit
You want to get your strikes as close to your stop loss as possible
In this case, I want my stop loss right under support
I'd sell the 39 puts and buy the 38 puts for a credit
Why those strikes?
Getting these strikes allows me to still make money as long as price stays above support
If both strikes are OTM by expiration, I will make the full credit (max profit)
Getting these strikes allows me to still make money as long as price stays above support
If both strikes are OTM by expiration, I will make the full credit (max profit)
This means that even if I'm wrong and price moves LOWER then when I entered...
I'll still make money as long as support holds
Which was my original trade thesis
I'll still make money as long as support holds
Which was my original trade thesis
Picking the right strikes is crucial to making money with spreads
Hopefully this thread helped you learn where to put your strikes
If it did help you... π
Hopefully this thread helped you learn where to put your strikes
If it did help you... π
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- having to rely on alerts
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