Credit spread strategies

[clarodina]

Anyone trade credit spread? Any gd strategy allow holding the credit spread to holding to expiration and get out at small gain

 

[Handle123]

Yes, but not going to hand it out. Takes great deal of actual work backtesting, and that is what you should be doing.

 

[clarodina]

Tried every strategies known to reduce the risk of credit spread getting itm at expiration but still geting out at quiten big off Any great veteran care to provide some guidences or using pm?

 

[MTE]

Tried every strategies known to reduce the risk of credit spread getting itm at expiration but still geting out at quiten big off Any great veteran care to provide some guidences or using pm?

There is not much to provide guidance on as you haven't provided anything substantial to even comment on. A credit spread is a directional bet (to a varying degree, depending on it being ITM, ATM, OTM), obviously you are getting the direction wrong.

 

[Gimpyron]

Use most liquid stocks and etfs only. As MTE said, its a pure directional bet based on your assumption.

 

[Steven Leeds]

Anyone trade credit spread? Any gd strategy allow holding the credit spread to holding to expiration and get out at small gain

Yes, that's all I trade. Do I have a "good" strategy? Well, I make a profit every month so I am pleased with my strategy thus far. What is my strategy? A combination of fundamental and technical analysis, sticking to my written trading plan/strategy which includes certain criteria including;

Delta, Theta, IV, Distance/% OTM, Time to Expiration, Probability of Expiring OTM (and ITM/ATM), Type of Option (Weekly, EOM, Serial), distance between the short and long strikes, etc.

Some I let expire OTM, others I take a profit (or cut a loss) when a certain profit (or loss) level has been reached.

Best

 

[Steven Leeds]

...geting out at quiten big off...

Care to translate that into English? In any case if your spreads are going ITM with regularity then you need to reevaluate your credit spread strategy. Perhaps you're trading the strikes that are to close to the market. For example if you are trading 30-50 deltas (close to the money) then the probability of going ITM are much greater than if you were trading 20 deltas or less. As stated elsewhere to you need to analyze just why your strategy is not working. What combination of factors are causing the trades to go ITM. Etc.

 

[clarodina]

Asking how do you guys adjust credit spread going into itm and get out at minimum profit

 

[El OchoCinco]

There is no minimum guaranteed profit...either they expire worthless for maximum limited profit, you close them prior to expiration for smaller profit or it goes against you from a few pennies to a bukkake and you lose a little or a huge amount.

 

[ironchef]

Can some of you guys help me out, my questions to all of you:

1. If credit spreads are essentially directional bets, in this case a bearish to neutral bet, why don't you just trade the calls/puts straight if you have a directional view? A credit spread is limited reward unlimited risk trade whereas straight long is a limited risk and unlimited reward trade. There must be good reasons why this and ratio credit spreads are favorites of professional, institutions traders (according to what I read from books and prof. Google)?

2. From an unlimited risk point of view, I am with OP, how to manage the trade if it goes against my view must be extremely important. Any comments here as to how to manage it?

Best wishes.