Hi!
As a new option trader, I have some basic questions…
I've been trading credit spreads with a small account.
I only write one contract each time with 5 points spread, 30-45 days exp.
After three months of trading credit spreads, I've noticed that my strategy is generating less profit than I initially expected. I'm looking for insights on how to improve this.
Considering the premium I collect ($1.20~$1.50), the broker fees ( $2.60 for 2 legs x 2—open and close ), and the fact that there has always been a debit at the close, the net profit ends up being far less than the possible maximum profit. I feel that the ratio of the broker's fee to Net Profit is quite high. I didn't think the broker's fee weighed in so much.
I was thinking of increasing the number of contracts, but then I would have to pay even more fees.
Also, what about increasing the spread instead of increasing the number of contracts? Besides the fee issue, I don't know which is better, increasing the # of contracts or increasing the spread to improve the profitability.
I'm eager to learn more about the credit spread strategy and understand if there are any key aspects I might be overlooking. Your feedback would be greatly appreciated!
Credit Spread profitability
byu/SomewhereVirtual5834 inoptions
Posted by SomewhereVirtual5834