Questions about credit spreads!!! Help me! Hello all, this is my first post in here! Nice to see you guys! I have previous option trading experiences in long call and long put but I never tried short selling options... So I guess I might move to credit spread to earn some monthly income. I am planning to get into index options but I have some questions would like to ask: Lets say I am going to sell a bear call spread (being bearish) 1] Is it always a good idea to keep the two strike prices close together as I realized that the further the two strikes, the risk/reward ratio increase which means I am risking more money for earning the little increment of reward that I can take? 2] I always heard that the good thing about credit spread is, you can always choose the probability of winning, e.g. in this case, the delta of the short call option is approximately 0.25 which means there is approximately 75% that the option will expire worthless and I can keep the profit, but I realize that the further OTM, the risk/reward ratio also increase rapidly, so in general, for credit spread, what is the optimum risk/reward ratio and should I consider much closer to ATM or still keep some distance OTM but not too far away? 3] Is it possible to construct a trade in credit spread with expected return greater than zero such that credit spread trading will be profitable to me in long run? 4] What is the formula of the expected return? I suppose the formula is as follow: Expected Return = P1R1 + P2R2 + ...+ PnRn P is probability and R is the return. So I deduced that expected return of credit spread is: Expected Return=(1-D)(P/T)+(D)(L/T) D: Delta of the Short Call P: Premium received from the Short Call T: Total capital required for the trade (margin required for the Short Call and the cost of the Long Call) L: Maximum loss of the trade (indicate as negative number) PLEASE CORRECT ME IF THERE IS ANY COMMENT OR ADJUSTMENT SHOULD BE MADE ON THE FORMULA... It seems that to me, no matter how I adjust, I can hardly get a positive expected return, any ideas? 5] In order to keep profiting in long run, is that I should avoid taking maximum loss whenever possible, such as making adjustment to the trade when the price breaks resistance lines or when it touches the strikes or breakeven points? Any ideas how you adjust the position for credit spread trade to ensure long term success?