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It is an interesting strategy on paper, but Larcher's group used a volatility-based measure to determine how far out of the money (OTM) to write their put credit spreads, and it generally worked out to be about 3-4% OTM, with tight automatic stops at around 7% OTM. While the premiums are obvious...

Phil, Thanks for your response. May I ask what kind of returns you've got on future spread trades over time? Can you recommend literature on this technique? Steve

Phil, I recently read the old thread --parts of it, anyway, because it is long-- you started back in 2005 on credit spreads on the SPX. I've been studying techniques on trading credit spreads for the past year after reading Gerhard Larcher's (et al) paper on the subject but have not taken the...