How I Trade Cheap Credit Spreads And Only Risk $25 Per Trade
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- Опубликовано: 8 ноя 2023
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Thanks for watching! You can grab my alerts + trading tools + indicator + join my next coaching call below for FREE: go.theimpeccablestocksoftware.com/cs-mifge
is this the free link? it's asking for credit card info
Professional options trader here (15 years) - Brutally honest - not a fan of the delivery, comes off kinda salesy to me personally, BUT the information is nearly spot on for to be profitable over time. regardless of what mechanism you use for entry, the stop loss is absolutely the most critical piece. It does not feel good but it is the ONLY way to be profitable long term when selling spreads. Not a mental stop. Not an "I'll just watch it" an actual stop loss order placed. I wanted to leave this comment for people like me who don't like flashy delivery. No disrespect intended.
I appreciate the input and sharing your thoughts! Could you please explain what came off as salesy or flashy so I don't do that again?
This video is very informative. There is no sales pitch nor did he make a "flashy" delivery. What is "flashy" is you leaving a comment claiming you are a "professional options trader of 15 years." If this is the case, why are you watching a tutorial on how to trade cheap credit spreads? I give this guy credit for creating educational content that covered entry, stop loss and exit strategies. Every trader has different techniques. No need to be a comment bully.
@@meditatetocreate3405 "no need to be a comment bully" pretty Ironic with your tone wouldn't you say? I didn't even say anything negative about him or anyone else. I shared my personal opinion. I actually encouraged people LIKE ME to listen to him. I am sure he is a grown adult who can handle constructive feedback and does not need you to swoop in and save him.
@@TenPercentCreditSpreads I would not read too much into it. It is just my personal opinion of your tone. I don't think it is intentional or even wrong. I came up in the whole bitcoin craze where everyone was pushing crazy returns and making everything sound amazing. Phrases like "all you have to do is". Then you jump in and find there its not quite as fun as you thought. But if your channel is growing and it works for you and your subs, please ignore me. Content is spot on.
I'm not going to change everything I do based on one comment, but I do appreciate you explaining as I do want to be aware! Also, nice response to the other comment :)
Great video! can't wait to try this!
Good luck! Let me know how it goes :)
Good video but whats missing and very inportant is understanding the IV smile/skew. At the two strikes it will be substantially different and will ve affected disproportionately by the market iv.
In steady state conditions, its all good, but if there is a jump (up or down) in the stock iv (due to earnjngs or news) or market iv then the loss on one side will outweigh the other
Remember options have a negative expected value by design so you are always battling against that
That’s definitely a consideration but when you have two offsetting contracts, it’s not affected as much as a single option
I've traded these before. One danger is overnight moves: it will go past your stop loss in pre-market and you'll get a higher loss. There were definitely some pre-market moves like that this year. That being said, I am back to trading these spreads now on the SPX using a very similar strategy to yours.
Overnight swings can definitely lead to a loss greater than you expected but the good news is large overnight swings aren't common when trading a diversified index and credit spreads have max losses built in.
@@TenPercentCreditSpreads They are VERY common
Great video ! I like 2-3 weeks myself but How do you set up the stop loss on a multi leg trade ?
Some brokers support it, but other brokers don't
Really good explanation best video I've seen so far on spreads
Glad you enjoyed it!
Well done. thank you
My pleasure!
Hello. Thanks much for this video! I'd like to know what you're paying when you set up this credit spread and also if you close it, they say just buy it (the option you sold) back, but what about the option you bought as part of the spread? I understand this is the part you buy for protection and it's supposed to be cheaper. Do you just let that one expire? How does this work?Thanks much!
I would reference my other videos for a more complete walkthrough of options and credit spreads.
Credit spreads are sold to enter which means to exit you need to buy it back. When you sell it (like anything you sell), you get money in return. You are providing insurance to the person who buys it from you and you receive a premium for doing that.
So it's a naked sold put option in the case of an uptrend and a naked sold call option in the case of a downtrend? Please clarify this one for me. Cause I understand spreads having two legs especially credit spreads. I would appreciate your response in these regard. Sestanious in South Africa.
Continued...Or the stop loss is on the first leg that is broken immediately after support/resistance level? If so, what happens to the other open remaining leg?
Do you set a live stop loss or just watch the trade and/or set alert and close the position when it hits your stop loss level?
I use a live stop loss using an auto trader now, but I don't do one through the broker because the market makers will screw with you if you do
Where can I find your indicator? I cannot find the link. Thank you!!
thanks again for everything. can you expland why is market value allways nagative like you have -28.00 Thanks
On contracts that you can’t BTC in .01 increments (bid/ask only at .05 intervals), do you just take the $5 hit to your credit to close it out?
Yes, you will have to take the hit which is why you try to find assets with a tight bid to ask spread
It is a very good point to put stop limit to reduce loss in your clip. But like some viewers (those who are veterans) below/above expound stop limit is not necessarily always working. Maybe it is important to protect beginners/novices watching this clip by quickly including caveat explanation. For instance: 1) Stop limit mechanism will not work during non-regular business hours including pre-market and post market period if the stock swings. 2) Sometimes when the stock moves up or down too fast, stop limit mechanism cannot sense it and is therefore not triggered. 3) Important days like Central Bank speech day including decision to increase or decrease interest rate, stocks may swing drastically during these days. In addition, maybe suggest to viewers especially novices/beginners to use demo/paper trading first for trying out over a period of time because if the stop limit they set did not work for whatever reasons in their real trading, they (some may be students) will suffer greater loss. Nonetheless, you have brought out a very excellent point to use stop limit, thank you for your kind presentation and sharing of knowledge. Keep up!
Protection of capital is the most important thing
Well, this style of trade locks in less profitability for more security/guarantee. If you can understand how to day trade options by analyzing algorithms, structure and liquidity in the charts you will be okay. If you risk more, the quality of the setup must be very good. Risk less by doing spreads=very basic understanding of markets. Not horrible, but not preferred in my eyes. It can still be very profitable for someone who doesn’t have too much of an understanding of markets especially algos.
I agree in the aspects of credit spreads provide security, safety and a higher win rate but you give up an unlimited upside because your win amount is capped. So definitely only made for certain traders!
@@TenPercentCreditSpreads yes, either way profit is profit. Both strategies are tailored to how much trading knowledge and individual has.
Awesome🎉 sir
My pleasure :)
I’m new to option, this may be a stupid question, why not just do a short put at the support level and set the same stop loss?
If it’s pumping hard u can always buy a few calls back and ride the trend closing everything else out but it have to be a big strong move and u have to catch it in time
Agreed! I do this in my group a lot!
this seems great for small accounts to build them up. How much would I need to have in my Robinhood account to implement this with 1-2 credit spreads to start out? Can I do this with only $200 in the acct?
Most broker accounts required $2,000 to be approved for margin trading. Credit spreads require margin, but it only takes $100 to place a trade.
@@TenPercentCreditSpreads I have a margin account but dont have $100 in it.
I was wondering if I could implement this with only $200
How do you set a stop loss on a multileg options trade?
You can't. That's why I built an auto trader that allows it.
Hmm... actually... I suppose you can theoretically hack around RH by reversing your spread with a limit Buy Price at Debit Buying Price + Your Limit Loss (e.g. $21 + $29 = $50).
But even if this works, you maybe at the mercy of RH's ridiculous Bid-Ask Spread...
Disclaimer: I haven't tried this myself.
The less direct advice maybe to look for another platform 😅
Hi, two questions: 1) Are these vertical credit spreads?. 2) Do you trade SPX?
What techniques do you use?
What do you mean?
How do you set the stop losses?
I covered that in one of my recent RUclips videos :)
@@TenPercentCreditSpreadswhich one?
Not the best strategy imo, it will work ok until you get a pretty good size gap down and your spreads are trading near 80% of max loss or higher depending on how close you are to expiration, but i do agree with you though, you need to use a stop of some form when trading spreads even if it is mental and stick to it. It took me blowing up three or four accounts years ago to figure that out.
Yes, black swan event or huge gap downs would result in a loss larger than the stop loss set. However, if you are using proper risk management like risking no more than 2% of your account in any one trade and you'll be fine!
@@TenPercentCreditSpreadsRisking 2% of your account. Does that mean if I have a 2k account. I should have a $20 dollar stop loss or I should be buying 20 dollar options?
How many days do you hold your spreads for before you exit. And how many are you trading to hit that 2-3k monthly profit?
In our current market, I'm trading at 50% of my normal size because of the crazy gap ups and downs overnight. When we are in a clear trend, I'm trading 20-30 spreads per trade and entering at least 2 trades a week.
Love this guy
Love you too brother :)
Question: your indicator shows white, and your video stated if white a Bear Call Spread but you showed a Bull Put Spread. Did I miss something?
No, I messed up.
Love the video. Great explanations.
I appreciate the comment, and thanks for watching!
Hi Austin: What online platform do you use to run the business of 10% Credit Spreads? Kajabi, etc.?
I built my own
@@TenPercentCreditSpreads Thank you Austin, I appreciate you responding.
do you let the credit spreads expire worthless? or take em off early?
Take them off early because you get out of the trade faster and have a higher win rate
@@TenPercentCreditSpreads thanks i’ll give it a shot. Last question: what is your target profit to take off and your target stop loss?
It's good that you're showing folks how to start out small, regardless of the few counter comments against the trade in comments below. Those comments may be well founded, like the one about big swings overnight that can get around the stop loss, but I'm sure you're making money; and again you're not suggesting folks who are new to options trade with money they don't have. Good job. To get to $5000 a month you must be doing many many such spreads. Doing the numbers it would take a net of 200 wins over losses to get $25 wins to hit $5000 in a month. It is work intensive for sure. Thanks for the video!!
Thanks Stan! Yes, there's a lot of specifics but it's a great start for people even if they only have $1000 to trade with.
Loved this. Can't wait to hear more.
Were you able to start putting into action
How do you set up a stop loss for put / call credit spread options in particular? Is it easy to do on any major brokerage?
Yes, but you have to monitor them yourself because it's tricky to have stop loss as it can executed by accident due to market makers
Did I miss something? Was there a spread in there? Just wondering.
Yes, I'm trading credit spreads.
Weekly chart ?
Daily chart - each candle represents one day
so why do a spread if you have a stop loss ? Is not the idea of a spread to have a known max loss ?
show how to set a stop loss on robinhood
I covered this in one of my recent videos but you can’t set a stop losses on a two leg options trade like a credit spread on Robinhood. You’ll have to set an alert or use a broker that supports it.
@@TenPercentCreditSpreadsIf a stop loss is critical, what broker is a good option that allows it on a two legged trade?
Say you buy an option for $$1.50, and you only want to risk $.20. Just click sell, there’s an arrow at the top that will open up the stop limit option. Click it, set your stop limit price at $1.35 and put your limit price at $1.30. Your order will automatically activate at $1.35 and try to sell at $1.30 without you having to monitor it.
I believe thinkorswim(now schwab) allows stops on spreads. Call to verify
TD Ameritrade (now Schwab), Interactive Brokers and TastyTrade allow it
With all due respect, the odd is not in your favor. Because you have a little less than 50% of winning probability but you are in win all or loose all situation. On the other hand, in order to win, you have to correctly guess the price movement. If you can, always or most of the time, correctly guess the price movement, you don't need to trade option because, it would be better to buy or short the stock more effective where you can set the stop loss cheaper. People use option to balance the probability vs. reward/risk ratio. For example, there are ways that you set up options orders where even if you are wrong, you still make money (of course there are some contingencies with that). But remember, probability and reward/risk ratio are always a trade off to each others. For example, if you want high wining probability, you would have to accept lower reward/risk ratio. These days, a lot of people posting those seems to be awesome winning trade videos but in fact, the results would be opposite for followers.
If you are trading in an uptrend then you naturally increase your win rate for credit spreads. So, it's close to a 70% win rate rater than a 50%. But I agree, you could use stock which wouldn't cap your gains. I trade credit spreads over stocks because even if the stock drops a bit or stays the same, I still make money where if I was trading stocks I wouldn't make money.
You said the indicator is free but in the link it says 68% off for the Black Friday sale and it's $97 so that is not free....
If you use the third link in the description, you can get it for free when you start a trial of 10% credit spreads
there are only 2 links in the description. where is the 3rd link to get the indicator for free incl the spread trial?@@TenPercentCreditSpreads
so stoploss is 2x the credit received.
crap, What happens when it gaps down?
You lose
you are the liquidity
If you are trading SPY then there is plenty of liquidity
you clearly do not understand. @@TenPercentCreditSpreads
Instead of setting a stop loss why not roll you options to collect more credit?
Because a stop loss will hit when the trend has changed so there's no point rolling if the trend isn't going in our favor, it'll just be another loss. Rolling is only good if the trend is still going in your favor.
many small wins = big win 😀
Base hits consistently = big win :)
do you only trade spy
At the moment, yes! Only watching and trading one stock makes my life a lot easier :)
@@TenPercentCreditSpreads How are you making 3-5k every month trading one ticker every 9 days and making $25 per trade?
@@TenPercentCreditSpreads Ok that makes sense then, I don't think you stated that in the video. I use about a .15 delta - 300-500 spread a week out and 1 day for SPY/QQQ. So far it's working pretty well for me, but I'm only 2 weeks in.
Keep me updated on how it goes :)
How do we get that indicator? So how did you risk $25 to made $5k a month? The video actually said risk 25 to make 21 over 9 days
The indicator is linked in the description. The trade takes 9 days because it's a 9 DTE trade. You risk $25 per spread.
@@TenPercentCreditSpreadsthanks. Didn’t realize it was a $97 indicator
Hey thanks but the indicator is actually a hundred bucks?
It's free when you start a free trial to the 10% Credit Spreads group
Show us how to put stop loss in Robinhood
Robinhood doesn't allow stop losses for credit spreads at this time
.30 stock
Call .05
?
Could you please explain a bit more?
Did I miss something? How is this a credit spread? Where's the second contract?
The credit spread can wrap both contracts into one.
Until RH closes that trade at 3:30pm on the day it expires and closes you out earlier than you'd like.
Yes, Robinhood is a terrible at letting contracts expire. This is why I recommend better brokers or closing trades early if using Robinhood.
@@TenPercentCreditSpreads Well they do this to protect you. You don't want your Long Leg expire and soon after your Short Leg gets assigned because the price landed between the 2. This bit me badly. Always close out positions before EXP even if the broker don't.
Yup I close them out at 50-60 percent profit . If they are worthless they are hard to close .
After hours moves can crush you
True! You can do this same approach on futures to remove that issue.
🔥🔥🔥
Thanks!
Fuck a stop loss, youll learn to get better if you dont use them.
Can u speak at a pace slower than a supersonic jet?
Haha I'll try but I naturally talk fast to not waste time.
10 , 50 , or 200 ma?
200 period moving average for the long term trend and 10 period moving average for the short term trend
Wait…if you’re only using 25 dollars what is your average rate of return. You need margin to pull this off..making 3 ti 5 thousand.
You are risking $25 per spread but I am trading 20 spreads or more in a trade
Each to their own I suppose, but I thought that that was a very good concise delivery. Thank you.
Glad you enjoyed it!
And if you do this 10 times the 29 losses add up. With this market it’s crazy
They could, that's why you should be very strict on your risk management
Bro, love your Great advice but, for the people like me that understand a littlebit English, Can you speak a littlebit slow. appreciate a lot
Noted, I'll work on that!
Show me the $5000 u made with this strategy and I believed. First theta decrease from 45 days and last days alow down. Two $1 wide spread the lose much higher then $5 or $10 spread because just a little move the premium will increase or decrease very fast and last overnight holding trade your stop loss won't work at all if stock moved before markwt open.
It shows the broker statement in the first few seconds of the video, but this is a profitable strategy when there is a defined trend in the market.
@@TenPercentCreditSpreads lol
this aint adding up to my tesla trade.. i put on a put credit spread for 207 and 205 today. it was at 209 and it hit 207 n slightly below and i was in negative a ton already.. i closed it out with $160 lost.. end of day the stock stay above my strike prices.. mean i would have won the trade but because it so close and i was losing a lot of money i didnt want to chance losing more.. y i no longer do spreads.. not worth it.. i wont 3 trades in a row.. 1 lost wipe it out..
The strategy taught in this video is recommended for SPY (aka a slow moving stock or ETF) and using a trend following strategy, not a highly volatile stock like TSLA.
The implied vol is the gotcha in the strategy. It only works if the IV is flat across the strikes and does not change to a smile while the position is in play.
Any market shock or stock specific shock (like news or +/- 2weeks around earnings) would make this strategy unprofitable unless you can predict the vol at each strike.
If you can then you are doing a volatility play on a spread, which is a significantly more profitable strategy, but is more complex to explain as you have to delta manage your position.
This seems too labor intensive.
Yes, there's no such thing as true passive income. Some work is always required.
GAPS lol
There are so many gaps in the market right now
indicator sure doesnt look free on your website
You didn't click on the last link in the description then!
Don't call it your level; that's confusing. I trade credit spreads....call it your short put strike price.
Level is more understandable for beginner traders, but yes technically it's the short put strike price.
Long story short - Use a stop loss so you don't get the full loss. Lol
Exactly!
Risking $179, the kid is NO Risk Management Expert. By his logic, and other buffoons' loudmouth presentations, selling naked out of the money calls risks nothing.
Post your taxes long form and your accounts trades . You come off as a wanna-be trader or how about a SALESMAN?
I share all my live trades in my free group linked in my description
This guy doesnt even review his video before putting it out xD at 4:58 u said blue you enter put credit and white u enter call credit. At 8:08 example shown white, and yet you entered a put credit as example lmao
My mistake! Sorry for the confusion. White = sell, blue = buy, grey = stay out
Get to the point
Will work on getting to the point faster :)
Thumbs down for the cringey clickbait thumbnail. Another thumbs down for taking over 10 minutes to say "cut your losses at 2x credit received".
Thanks for watching the video and commenting! I appreciate it :)
In trade example 1 you contradicted your moving average filter. How to confuse the f..k out of newbies.
You're welcome ;)
Lol.
Lol
Useless. You will lose everything if u did like what u said.
Thanks for your input! You should give it a try with paper money and let me know how it goes :)
Ultra dumb ideas
You got it ;)
Scammy Man
Why?
@@TenPercentCreditSpreads you making any money.....lol.hahaha
Typical,, you say a chart is free but it isn't free unless you up sell SMH
Tradingview is a completely free charting platform.