The Truth About Credit Spreads with Options
Credit spreads are one of the most popular instruments used in Option Trading. The question is why. It’s simple. The Credit Spread is the easiest spread to understand for beginning option traders, but does this make it a good strategy?
The truth is that Credit Spreads have a high probability to make a profit. However, along the way to realizing a gain with this trade there is a lot of risk and stress involved. For example, the average Credit Spread trader will face 100% losses on this trade several times a year while trying to make a modest 5 to 10% a month. What happens is that eventually all Credit Spread Traders meet their dooms day. Sooner or later all option traders that use only Credit Spreads wipe out their trading accounts.
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