Secret 98RULES OF THE ROAD FOR INDEX CREDIT SPREADS
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Here are the guidelines I have set for index credit spreads:
1. Use index options.
2. Sell (write) a far-out-of-the-money index option.
3. Buy an index option that is 5, 10, or 15 points further
out-of-the-money.
4. Make certain to get a credit of at least .45.
5. Enter such spreads with less than three weeks before expiration.
6. Set a stop-loss that is out-of-the-money for the option
you have written.
7. Set a stop-loss where there is an 85% chance of not
touching the stop-loss.
Here are the guidelines I have set for index credit spreads:
1. Use index options.
2. Sell (write) a far-out-of-the-money index option.
3. Buy an index option that is 5, 10, or 15 points further
out-of-the-money.
4. Make certain to get a credit of at least .45.
5. Enter such spreads with less than three weeks before expiration.
6. Set a stop-loss that is out-of-the-money for the option
you have written.
7. Set a stop-loss where there is an 85% chance of not
touching the stop-loss.