The Credit Spread Option Trading Strategy is perhaps the most dangerous option strategy around.
See here’s the deal: when a new fresh faced option trader first hears of this trading strategy – he or she becomes so enamoured with it that they just can’t seem to help but jump right into trading them – risking way too much money – and without much thought of what they are going to do if the trade starts to go wrong.
And it seems that a good percentage of them – if not most of them – promptly wind up getting their groins kicked in, their heads ripped off, their eyes poked out, and getting hurt really, really bad.
Now stop – wait – hold on just a second.
Before you start to get the wrong impression, please, let me clarify something here.
I absolutely LOVE credit spreads. ALOT. In fact, the credit spread is right up there as one of my favorite trading strategies.
And I think it REALLY IS a good solid trade.
And those claims and stories of ten percent monthly gains and ninety percent probabilities? They are absolutely true.
Here is the problem: All those fresh, green and excited new option traders have no idea what they don’t know. This trading options for income thing is like an alien planet – with a whole new set of rules inside a brand new reality. And when the person who has introduced them to this new way of trading just tells them about the good but forgets to tell them about the bad – they wind up jumping in with way too much confidence, misunderstanding, and expectations that are completely wrong.
Yes it’s true that credit spreads and iron condors can be put on with an eighty to ninety percent probability of winning. And yes it’s true that they can generate returns of over ten percent a month. BUT – they also come with a dangerous risk to reward ratio that can be in the range of ten to one.
That means that while trading these trades you are putting at risk 10 bucks for the chance to make just 1. Or – in reality, in the instance of say a standard ten lot index iron condor, you are risking ten thousand dollars for the chance to make just one thousand dollars.
And as mammy used to say to us kids – ‘that ain’t nothin but a real awful bad egg’.
Even with the ten percent monthly returns and the high probabilities – all that needs to happen is for a problem month to come along (and it WILL, believe me) – and the next thing you know you’ll be staring at a gigantic loss and a zero balance account!
But…
There is still hope…
Like I said before, I LOVE the credit spread trade.
It’s one of my favorite trades – and it continually generates profits for me.
So obviously there’s a way around that horrible risk to reward issue and the inevitable problematic losing months.
And there is.
It’s all in how you manage the trade.
As long as you learn the CORRECT way to initially place these trades, then combine that with a super simple management technique and a few easy adjustment tricks – this risk to reward issue can be completely eliminated and no longer presents a problem.
You just need to arm yourself with a small amount of trading know-how. A few credit spread trading tricks that will allow you to quickly and easily adjust yourself out of sticky situations and smother any problem month threat that comes along, permitting you to experience the Credit Spread option trading strategy for all that it’s ‘really’ cracked up to be.
To learn how to properly trade the Credit Spread Strategy for consistent monthly income, go to this Weekly Options website and watch our Free Video and get our Free Report.
