Credit Spreads: Here is my plan. I would like to know what it is lacking cause it sounds to perfect. you want to buy and OTM put credit then take that to fund a long call (OTM) = all out by one strike Total cost would be say $60 Potential to make full credit on puts and take some from the long call. pitfalls: loose the call entirely (100) and be out some on the puts. (This is one month out) The way I see it is that I am risking 350 total (on both sides) to capture about that same amount, maybe a little more. BUT with correct management this could still make more than it looses even if things don't go your way. So... what did I miss? Thanks!
You may wanna re-read your post and then edit it accordingly. For example, what does this mean? How the heck do you buy an OTM put credit spread? Also post details - strikes and prices.
The credit on the out-of-the-money put-spread will hardly buy an out-of-the-money call-outright. The "strategy" has too much of a bullish bias. If the market rallies strongly, you're profitable. If the market sits still or rallies only a little, you'll lose. If the market goes down, you'll definitely lose.
That is correct, it would pay for about 1/2 the call price. But I suppose you are correct. (the "strategy" sucks). Is there a way to play both sides using leverage and minimal risk?