Credit Spread Strategy
Credit spreads (bull put spreads and bear call spreads) are defined-risk options strategies that collect premium upfront. You sell a higher-premium option and buy a lower-premium option at a different strike, profiting from time decay and/or a directional move.
60-70%
15-25 days
30-45 days to expiration
How It Works
- 1
Choose direction: bull put spread (bullish) or bear call spread (bearish)
- 2
Sell the near-the-money option at 20-30 delta for the short strike
- 3
Buy a further out-of-the-money option as protection (defines max risk)
- 4
Target 30-45 DTE for optimal theta decay curve
- 5
Close at 50-65% of max profit or manage if short strike is breached
Best For
Frequently Asked Questions
What is a credit spread?
A credit spread involves selling one option and buying another at a different strike price in the same expiration cycle. The credit received upfront is your potential profit if the spread expires worthless.
What is the difference between a credit spread and an iron condor?
An iron condor is simply two credit spreads combined (one on each side). A single credit spread is directional, while an iron condor is market-neutral.
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