Hello OptionGenius.

I have been trading credit spreads for about 3 months now with some success.  I read the nine part  course and realize that my past training didn’t discuss much about selection of trades and adjustment of trades.  When I was looking around the website, I saw a brief reference on how you scan for and pick your trade opportunities, how you use the mathematical models with standard deviation to help your selection and how to determine exit points., but there weren’t too many details on these topics.   Do you share the information about scans, about the mathematical models and how to use them as the subscriptions move along?

Eric,

For credit spreads most traders use technical analysis to find support and resistance and use those levels to pick strikes. I have found that, that strategy works except when it doesn’t. support and resistance are guidelines not walls that the stock will [...]

The first thing to determine is whether the trade is a debit trade, where you pay money for the trade, or a credit trade, where you get money. Iron condors and credit spreads are two examples of credit spreads. Butterflies and Calendar Spreads are debit spreads.

With a debit spread, the max you can lose is the amount you paid for the trade. The max you can gain is harder to determine. I do it using the Analyze tab on my broker’s platform. On a butterfly you can make up to 200% of the debit and sometimes more. On a Calendar you can make 100% of the debit. But you normally will not. At expiration, the profit zone becomes very narrow and the Greeks (delta, gamma, theta, and vega) become very volatile and option prices make huge swings up and down.

On either of these trades, 20% profit is a good number [...]