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Of all the many option trading strategies available, the credit spread is quite possibly the most popular, most discussed, most utilized – and most DANGEROUS strategy of them all.
The thing is, when rookie option traders first hear of the credit spread – very few seem to able to resist the temptation to jump right into trading them – with too much real hard earned money on the line – and not nearly enough education.
And unfortunately what always seems to happen to a high percentage of them is that they promptly wind up getting their trading accounts demolished and their heads handed to them on a platter.
Now stop – wait – hold on just a second.
Before you start to get the wrong impression, please, let me clarify something here.
I absolutely LOVE credit spreads. ALOT. In fact, the credit spread is right up there as one of my favorite trading strategies.
And yes – I really do think it’s a great and dependable way to trade.
And yes, I absolutely believe all those stories and claims you hear swirling around about credit spreads generating ten percent plus monthly returns and providing trades that have the probability of winning somewhere in the range of eighty to ninety percent. In fact, I KNOW those stories are true because I see it happen all the time in my very own trading account.
The big problem is that there is some very important information being left out of those credit spread claims and stories. Information that I’m sure would keep alot of rookie option traders – who frankly just don’t know any better – from blindly making that ‘over-confident’ leap into the credit spread abyss.
See what isn’t being talked about with this trading strategy is that while yes, they can provide great monthly returns and high probabilities of winning- they also come attached with a horrendous risk to reward ratio – sometimes as poor as 10 to 1!
10 to 1! That means that in order to try and make just one dollar, you need to be willing to risk ten. Or, put another way – in order to make 100 dollars, you need to risk 1,000 dollars. Or – risk $10,000.00 to hopefully make just $1,000.00!
And as mammy used to say to us kids – ‘that ain’t nothin but a real awful bad egg’.
Because once you do the math you find that even with those glorious monthly returns with 80 to 90 percent probability of winning – all it takes is just one problem month to come along and cause a loss that will completely obliterate the 8 to 9 wins you’ve managed to rack up – as well as potentially the rest of your entire account!
Nevertheless…
There is still hope…
As I mentioned earlier – I really do LOVE trading the credit spread strategy.
And – I consistently make money from it.
So obviously there’s a way around that horrible risk to reward issue and the inevitable problematic losing months.
And there absolutely is.
It all has to do with the management of the trade.
That risk to reward problem quickly becomes a complete non issue as soon as you educate yourself on the proper way to initially set these trades up and how to correctly manage and adjust them.
Once you possess the correct credit spread trading knowledge and know how – and understand how to apply a couple super easy to implement adjustment tricks – you’ll know exactly how to exterminate any problematic market threat that comes your way, allowing you to experience the credit spread strategy for all that it’s ‘actually’ cracked up to be.
To learn how to properly trade the Credit Spread Strategy for consistent monthly income, go to this Credit Spread website and watch our Free Video and get our Free Report.
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