Secret 73RULES OF THE ROAD
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I have established a series of rules for the road for designing
debit spreads for stocks, indexes and commodities.
How to Design a Stock or
Index Debit Spread
1. Buy a close-to-the-money option.
2. Sell a further out-of-the-money option.
3. The maximum profit must be at least 200%.
4. Do not sell an option for less than .4.
5. Try to design a spread with a probability of profit of 35%
or better.
How to Design a
Commodity Option Debit Spread
1. Buy a close-to-the-money option.
2. Sell a further out-of-the-money option more than one
strike price out.
3. The maximum profit must be at least 300%.
4. Do not sell an option for less than $100.
5. Always use a spread order.
6. Try to design a spread with a probability of profit of 35%
or better.
7. Never pay a commission of more than $20 round trip per
side.
Spreading seems complex but can be simple if you keep it
simple.
I have established a series of rules for the road for designing
debit spreads for stocks, indexes and commodities.
How to Design a Stock or
Index Debit Spread
1. Buy a close-to-the-money option.
2. Sell a further out-of-the-money option.
3. The maximum profit must be at least 200%.
4. Do not sell an option for less than .4.
5. Try to design a spread with a probability of profit of 35%
or better.
How to Design a
Commodity Option Debit Spread
1. Buy a close-to-the-money option.
2. Sell a further out-of-the-money option more than one
strike price out.
3. The maximum profit must be at least 300%.
4. Do not sell an option for less than $100.
5. Always use a spread order.
6. Try to design a spread with a probability of profit of 35%
or better.
7. Never pay a commission of more than $20 round trip per
side.
Spreading seems complex but can be simple if you keep it
simple.