Hey guys, welcome to this article. I’m going to walk you through how I made roughly $650 trading $SPY credit spreads. This is a very simple and reliable strategy, and I want to share not only how I executed the trade but also my thought process behind it. This way, you can try it for yourself.
I opened the trade on Tasty Trade on April 4th and closed it on April 17th, four days before the expiration date. I locked in a $730 gain, but after deducting the $72 in commission costs, I made a profit of around $650.
My Credit Spreads Trading Strategy Explained
Now let me explain why I took this trade. If you look at the chart in TradingView, you can see that $SPY was in an uptrend. When the market broke the uptrend line, it entered a downtrend. However, the downtrend line was then broken, indicating that the market was returning to an uptrend.
To take advantage of this bullish trend, I waited for a red day to enter a put credit spread. The best time to do this is when the market is going up, as put credit spreads make money on the way up. I chose a strike around $397-$398, which was where a trendline showed support. I put on a put credit spread, which meant I would make money as long as $SPY stayed above this level by the expiration date.
After consolidating for a bit, the market pushed up, and I closed out the trade on April 17th when the market was green. I made roughly 15% gain on my return on capital in two weeks.
My Secret Resource For Finding Amazing Trade Ideas
The key to this trade was understanding trends. If I trade with the trend and put my levels near strong support levels, I have a high probability of success. In fact, the trade was mathematically the best trade to put on at that time, as I found out from the Trade Ideas Algo, which uses math to find credit spread trades with over a 90% historical win rate and a return on capital of over 15%.
If you want to learn more about trading credit spreads, click on the link in my description to get three free trades. Whether or not you sign up, you’ll still get these free trades. I hope this breakdown helps you in your trading journey. See you in the next article!
Thanks for reading 🙂
Austin Bouley
CEO & Chief Strategy Officer