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

Discussion in 'Options' started by trendisyourfriend, Jun 20, 2021.

  1. Yes it is, what are you gonna be left with !?
     
    #11     Jun 23, 2021
  2. Here is a simple idea.

    1. Determine what you would accept as a minimum annual return on the money used in your account.
    2. Take the profit on the credit spread and divide by the amount of your account used to support the trade. Annualize that.
    3. Does it make what you have determined to be your minimum?
     
    #12     Jun 23, 2021
  3. If that statement would be true then take the reverse position and buy the debit spread and that changes your odds of being profitable from very low to very high. Reality is neither is true. A credit spread is a bet that prices will stay below your selling strike and a debit spread is bet that prices will expand beyond your selling strike. It is a directional play one way or the other and you are either right or wrong. If you position yourself at 1:1 then it is a coin flip and if you are good at picking the direction you win.
     
    #13     Jun 26, 2021
    taowave likes this.

  4. IMO ....... Both positions have very low odds of being profitable.


    If you are good at picking the direction a long option position is far better than a debit spread or credit spread.
     
    #14     Jun 26, 2021
  5. taowave

    taowave

    No need for opinions..

    I'm going to run a backtest on naked long calls on the Spy vs call spreads. Im confident deep ITM calls outperform ATM,whether it be equal notional or equal Delta..

    Not 100 percent on equal delta/premium call spreads..

     
    #15     Jun 26, 2021

  6. Excellent ....looking forward to the results.
     
    #16     Jun 26, 2021