I’m excited to introduce a put credit spreads strategy called the Bullish Play that boasts a historical win rate of 76% and an impressive average annualized return of 53.62%. Moreover, it has been back-tested by a third party, further confirming its consistent outperformance of the market.

So, let’s dive into the details of this powerful strategy, including the entry criteria, how to set up the trade, and even a recovery method for those market conditions that might require a more cautious approach.

Understanding the Bullish Play Criteria

The Bullish Play strategy is characterized by specific entry criteria that help identify the ideal setup for a put credit spread. These criteria work in tandem to ensure that the trade aligns with the market conditions. Let’s break down the key criteria for entering the Bullish Play:

1. Stock Price Above the 200-Day Moving Average: One of the primary conditions for entering the Bullish Play is that the stock price should be greater than the 200-day moving average. This criterion provides a strong indication of an uptrend and an optimal environment for this strategy.
2. Stock Price Within Three Standard Deviations: For the Bullish Play, it’s crucial to ensure that the stock price remains within three standard deviations of the 200-day moving average. This condition helps identify stocks that are not overextended beyond the mean, maintaining the trade’s integrity.
3. SMA 10 Greater Than Yesterday’s SMA 10: The short-term trend is another key factor. The strategy requires the 10-day simple moving average (SMA) to be greater than the previous day’s 10-day SMA. This condition ensures that the stock’s short-term trend is positive and strengthening.
4. Stock’s Daily Price Change: The last condition for entry specifies that the daily price change should be greater than -0.15%. This safeguards the trade from entering during major market downturns. It aims to catch minor down moves while avoiding significant bearish trends.

How to Structure the Put Credit Spreads Trade

Once the entry criteria have been met, it’s time to structure the Bullish Play trade. Here’s how you can set up the trade for success:

1. Choose a Suitable Expiration Date: Look for expiration dates that are nine days into the future, but make sure they fall on a Monday, Wednesday, or Friday. This ensures that your trade adheres to a weekly options expiration cycle.
2. Select a 25 Delta Option: Aim to select a put option with a delta of 25. This equates to roughly 1% away from the stock price. This selection provides an optimal balance between probability and risk.
3. Trade a $1 Wide Spread: Construct a $1 wide put credit spread, which means selling an out-of-the-money put option while simultaneously buying a lower strike put option. This width helps manage your risk while maintaining a favorable risk-to-reward ratio.

Put Credit Spreads in Changing Market Conditions

While the Bullish Play strategy is ideal for bullish markets, there are times when market conditions change. The recovery method provides a way to adapt to these shifts in the market. If the market crosses below the bottom yellow line, signifying it’s overextended to the downside, it’s time to consider a different approach.

The Bullish Play put credit spread strategy is a powerful tool for traders seeking consistent and high-probability returns. By adhering to the specific entry criteria and properly structuring the trade, you can navigate the market with confidence and a remarkable historical win rate of 76%. Remember to use the recovery method when market conditions demand flexibility.

Don’t forget to check out my free training workshop to learn more about the Bullish Play strategy and other options trading techniques.

Thanks for reading 🙂
Austin Bouley