The Winning Secret: Credit Spreads
How this Strategy Works
The Winning Secret
The Winning Secret takes advantage of time decay and the natural fluctuations of the underlying stock or index by selling short term–10 to 17 days– out of the money credit spreads.
A credit spread is where you sell an out of the money option–either a call on bearish trades, or a put on bullish trades. And then you buy another option a little further out of the money to hedge.
With a hedge you can only lose the difference between the strikes minus your credit–in other words a relatively small amount of money compared to selling naked (just selling the call or put without a hedge).
Since the closer option has more value than the further option it creates an instant credit in your account. Unlike most any other trading strategy, with this method you get paid the moment you put on the trade.