What's a decent max profit for a credit spread?

T

trendisyourfriend

Hi guys, what sort of max profit do you look for when trading bear call spreads?

The SPY just closed below the 50 day moving average on Friday June 18. According to Investor's Business Daily, there have been 5 distribution days recently and the uptrend is under pressure.

The current price of the SPY is 414.92.

I'm looking to sell the July 16 435 call for $28 and buy the July 16 440 call for $13 to receive a net credit of $15.

Is $15 too little? What's the minimum max profit that you typically look for when selling vertical spreads?

Thanks
 
trendisyourfriend said:
Hi guys, what sort of max profit do you look for when trading bear call spreads?

The SPY just closed below the 50 day moving average on Friday June 18. According to Investor's Business Daily, there have been 5 distribution days recently and the uptrend is under pressure.

The current price of the SPY is 414.92.

I'm looking to sell the July 16 435 call for $28 and buy the July 16 440 call for $13 to receive a net credit of $15.

Is $15 too little? What's the minimum max profit that you typically look for when selling vertical spreads?

Thanks
More...


Are you saying the bear call spread is for a credit of $0.15?
 
Ask yourself why would I risk $485 to make $15....the risk/reward in a directional trade should be based on your level of conviction..... For me, if I have a strong bearish bias then I look for at least 1:1 R/R.
 
iprph90 said:
Ask yourself why would I risk $485 to make $15....the risk/reward in a directional trade should be based on your level of conviction..... For me, if I have a strong bearish bias then I look for at least 1:1 R/R.
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  • The odds of that 1:1 R/R Credit Spread being profitable are very low.
  • To get that R/R you are ATM and most likely close to earnings - not good.
 
OptionsOptionsOptions said:
  • The odds of that 1:1 R/R Credit Spread being profitable are very low.
  • To get that R/R you are ATM and most likely close to earnings - not good.
More...

Yes, probably so....Did I mention strong bearish bias which would not rule out ATM or ITM credit spreads...Regardless, my point is don't putz around for pennies...lay out your plan, know your risk, exit the trade with defined targets.
 
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