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Thursday, September 25th
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“Tell me, what is it you plan to do with your one wild and precious life?”
– Mary Oliver
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The Wave Indicator is back with a new entry you’ll want to see now.
Details here!
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Major Market Events
- Fed Split on Rates — Officials warn inflation risks remain even as Trump’s appointee pushes for larger cuts
- Stocks Slide for Third Day — Markets dropped again with the S&P 500 and Nasdaq extending their recent losing streak
- GDP Revised Higher — U.S. economy grew at a stronger pace in Q2, with GDP now estimated at 3.8%
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🤔 My Thoughts
Weekly Credit Spreads: Why I Like Them (and When I Place Them)
Simple math, simple rules, steady results
I’ve been getting a lot of questions about the short, weekly credit spreads I sell — especially on a big, liquid name like Apple (AAPL).
Here’s my plain-English playbook, along with the simple risk math we walked through on yesterday’s Profit Panel.
Why This Trade Fits A Lot Of Weeks
On air, I explained that my goal with a weekly bear call spread is to let time decay, also known as theta, do the heavy lifting.
I’ll typically sell a call above where price is trading (for example, around a 30-delta strike) and buy a further-out call to cap risk.
That brings in a credit up front. If price stays below my short strike through expiration, the options decay, and I keep what I collected.
I also noted I like to place these mid-week — Wednesdays tend to work better—because the last half of the expiration cycle is where time decay really picks up.
What A Credit Spread Is
You sell one option closer to the money and buy another further out from the money, both with the same expiration.
A credit spread can be done in either direction — bearish or bullish.
With a bear call spread, you sell a call with a strike price above the current price and at the same time buy a call with a strike price higher than that. For example, if price is at $100, you could sell the $110 and buy the $115.
You collect a credit immediately and your max loss is capped by the long call (that’s the name for the call you buy.)
The Risk Math We Covered
On the show, I spelled out the basic numbers: with credit spreads, you’ll always be able to lose more than you collect as premium. That’s the nature of a limited-profit, limited-loss trade.
For example, if I collect $0.20, my max loss might be around $0.55 on that trade.
While that might sound scary, the trade makes sense because probability and time decay are tilted in your favor.
I also emphasized the simple win conditions: When you sell a call spread, you have three ways to win:
- if price goes down
- If price goes sideways
- or even if price goes up a little
As long the price closes below your short strike — the strike you sold — on expiration day.
When I Place Them… And When I Don’t
- I prefer liquid tickers with tight bid/ask prices and plenty of strikes
- I place them after I check the daily close — if price is under a level I trust (for example, a moving average or recent resistance turned resistance again).
- If a big event is hours away and prices are jumpy, I either ask for a higher credit and wait (for example, post $0.24 if the mid is $0.20) or I pass on the trade.
- Another safe choice is to move the short strike farther from the current price, taking a smaller credit in exchange for more room.
Sizing And Exits
I keep size small (think 0.5%–1% of my total account size per idea) and pre-plan exits.
If I can buy the spread back for 50% of the credit I collected, I often take it and move on.
If price pushes through my short strike and holds on a closing basis, I don’t hope—I reduce size or completely exit and free up cash.
One More Reminder From Geof
Geof Smith pointed out a common frustration with debit spreads: early in the week, “nothing’s decayed yet,” so a call debit spread may barely budge even if price ticks up. That’s exactly why I lean on credit spreads mid-week: the decay works for me, not against me.
Bottom Line
Weekly credit spreads give me a defined-risk, high-probability way to let time work in my favor.
I place them in liquid names, aim above current price, favor Wednesdays, keep size small, and manage by the close, not the first intraday wiggle.
Click here to watch the on-demand replay!
And don’t forget to register your spot here to join us next time we go live!
To Better Trading,
Alex Reid
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