How I Trade Cheap Credit Spreads And Only Risk $25 Per Trade

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[evenicantrade]

Professional options trader here (15 years) - Brutally honest - not a fan of the delivery, comes off kinda salesy to me personally, BUT the information is nearly spot on for to be profitable over time. regardless of what mechanism you use for entry, the stop loss is absolutely the most critical piece. It does not feel good but it is the ONLY way to be profitable long term when selling spreads. Not a mental stop. Not an "I'll just watch it" an actual stop loss order placed. I wanted to leave this comment for people like me who don't like flashy delivery. No disrespect intended.

[benjaminlee]

It is a very good point to put stop limit to reduce loss in your clip. But like some viewers (those who are veterans) below/above expound stop limit is not necessarily always working. Maybe it is important to protect beginners/novices watching this clip by quickly including caveat explanation. For instance: 1) Stop limit mechanism will not work during non-regular business hours including pre-market and post market period if the stock swings. 2) Sometimes when the stock moves up or down too fast, stop limit mechanism cannot sense it and is therefore not triggered. 3) Important days like Central Bank speech day including decision to increase or decrease interest rate, stocks may swing drastically during these days. In addition, maybe suggest to viewers especially novices/beginners to use demo/paper trading first for trying out over a period of time because if the stop limit they set did not work for whatever reasons in their real trading, they (some may be students) will suffer greater loss. Nonetheless, you have brought out a very excellent point to use stop limit, thank you for your kind presentation and sharing of knowledge. Keep up!

[bernkbestgirl]

I've traded these before. One danger is overnight moves: it will go past your stop loss in pre-market and you'll get a higher loss. There were definitely some pre-market moves like that this year. That being said, I am back to trading these spreads now on the SPX using a very similar strategy to yours.

[Spraht]

How do you have a higher win rate if your stop is next candle? Doesnt make sense for credit spreads, just buy normal calls/puts at that point.

[ronniechowdhury]

Good video but whats missing and very inportant is understanding the IV smile/skew. At the two strikes it will be substantially different and will ve affected disproportionately by the market iv.

In steady state conditions, its all good, but if there is a jump (up or down) in the stock iv (due to earnjngs or news) or market iv then the loss on one side will outweigh the other

Remember options have a negative expected value by design so you are always battling against that

[stanmanmedia]

It's good that you're showing folks how to start out small, regardless of the few counter comments against the trade in comments below. Those comments may be well founded, like the one about big swings overnight that can get around the stop loss, but I'm sure you're making money; and again you're not suggesting folks who are new to options trade with money they don't have. Good job. To get to $5000 a month you must be doing many many such spreads. Doing the numbers it would take a net of 200 wins over losses to get $25 wins to hit $5000 in a month. It is work intensive for sure. Thanks for the video!!

[f.k]

How do you set a stop loss on a multileg options trade?

[Oct-jydz]

Great video Thx. What delta number do you use? 85%-win rate, that means 15 Delta. Do I get your point?

[leonth]

With all due respect, the odd is not in your favor. Because you have a little less than 50% of winning probability but you are in win all or loose all situation. On the other hand, in order to win, you have to correctly guess the price movement. If you can, always or most of the time, correctly guess the price movement, you don't need to trade option because, it would be better to buy or short the stock more effective where you can set the stop loss cheaper. People use option to balance the probability vs. reward/risk ratio. For example, there are ways that you set up options orders where even if you are wrong, you still make money (of course there are some contingencies with that). But remember, probability and reward/risk ratio are always a trade off to each others. For example, if you want high wining probability, you would have to accept lower reward/risk ratio. These days, a lot of people posting those seems to be awesome winning trade videos but in fact, the results would be opposite for followers.

[albertodeulofeu]

In my experience trading spreads (it’s all I do), when it approaches the short strike, your loss is significantly more than 1-2x loss.

[marquise]

How long have you been trading options?

[GeorgeMcNeil-op]

Hi, two questions: 1) Are these vertical credit spreads?. 2) Do you trade SPX?

[ILLFateTony]

Not the best strategy imo, it will work ok until you get a pretty good size gap down and your spreads are trading near 80% of max loss or higher depending on how close you are to expiration, but i do agree with you though, you need to use a stop of some form when trading spreads even if it is mental and stick to it. It took me blowing up three or four accounts years ago to figure that out.

[DinoTamer]

Do you set a live stop loss or just watch the trade and/or set alert and close the position when it hits your stop loss level?

[markoosterling]

Interesting video and nice you covered entry and exit strategy but keeping a stoploss might be not possible in case of violent moves or gapping up/down. What is your experience with that?

[MandoDeLeon]

Great video ! I like 2-3 weeks myself but How do you set up the stop loss on a multi leg trade ?

[Wendywonder]

I’m new to option, this may be a stupid question, why not just do a short put at the support level and set the same stop loss?

[skmorrow]

I have been trading credit spreads for about one year. I am slightly down over that time. The strategy I use is to enter positions at delta 20, 45DTE. I close the position at 50% profit, or 40 delta. I close for sure at 21DTE. I try to keep a neutral delta overall. The problem is that one bear call going against me, wipes out multiple bull put spread gains. I am not sure how to keep the losers from wiping out my gains. Maybe I need to close the losers sooner.

[hannahkusutton]

thanks again for everything. can you expland why is market value allways nagative like you have -28.00 Thanks

[TheLastTemplar]

How many days do you hold your spreads for before you exit. And how many are you trading to hit that 2-3k monthly profit?