Initiating A Credit Spread

Getting the spread on correctly is important, novice traders blow themselves up trying to get the “edge” on the market makers. Forget about that strategy it won’t work, you are not going to be able to out execute the market makers.  There are a couple of choices that will work getting the spread in place. First you can “leg” the spread by buying the long side of the trade first and selling the short leg second. I use this strategy when I have a preference in market direction. I get my limited risk leg on first and then try to sell the credit side with more premium. Second you can set your browser on the site you are using to find out where the spread is trading in the market. You should be able to get filled within a few cents either way once you know where the spread is trading in the live market. The third way is always wrong it is to leg the spread by selling the short option leg first. This is selling a naked option and will eventually cause a big loser. You are not going to beat the wise guys at their game. Eventually the impossible will happen and as soon as you sell the naked option Houston will get 50 inches of rain, and you will take a possible risk of $280 and turn it into $3000! You will then email me and tell me that I don’t know what I am doing and the risk is much greater than I claim it is. Remember bulls and bears make money in the market, pigs get slaughtered! Don’t be a pig there is plenty of money to be made doing it the right way!