Comments on: Credit vs Debit Spread—Which is Better?

By: MIKE LOOS

MIKE LOOS — Tue, 29 Jun 2010 13:39:44 +0000

the ITM Debit Spreads seem to have the lowest theta or time decay i think, but the premiums are much higher too.
I feel that for me a Credit spread has a better chance of
success less risk and less profit but more winners and
less of a draw down on your margin account. Allen, does
this reply sound right to you? Michael

By: Joe B

Joe B — Thu, 18 Mar 2010 04:57:26 +0000

What about buying in-the-money debit spreads? In this case, the underlying can stay where it is, go up, or down, and you can still profit from the difference in time value of the 2 strikes. The underlying just has to stay above the sold strike (in the case of calls) for maximum profit. I haven’t tried this yet ‘for real’ but I’ve been paper trading it, and wonder if you have any advice.
One disadvantage is that you have to buy back the position at expiration and can get burned by the bid-ask spreads, and commissions.
I would love to know anyone’s thoughts or experience with this strategy! Thanks.

By: Xueren Zhang

Xueren Zhang — Sat, 07 Nov 2009 16:23:36 +0000

But according to some statistics,around 88% of options expires worthless.Therefore,for practical reason,debit call and put spreads ,even though they have advantages,still a hard game to play,unless we have at least 80% chance that the underlying security will go up or down to a certain range.Credit spread,on the other hand,may be “safer”,if we are 80% sure of strong support and resistance level.Selling put spreads with some “dead” blue chips like MCD,KO,VZ,PG are my trades since March,for income purposes.Every month,there is a selling opportunity with one of those stocks.Trendy stocks like FCX,AAPL,GS are also worth to get into,but big price swings often make me nourvous.Everytime, dropping 10 to 25 points is good time to enter selling put spreads.It is same as buying stocks at dip,if we have enough capital.Iron condors are better choices,because they are involving selling both call and put spread.OG is a fine craftsman to design SPX and RUT.I would also love him to recommend,once in a while, an iron condor to take a stock ( of course,more complicated than index ).