Credit Spreads Part 3

The Essential Credit Spread The Essential Credit Spread Credit Spreads Part 3

ACVO Strategy

Parameters and Sizing

  • DTE 180+
  • Put credit and Call credit spreads used
  • Strikes nearest $600 credit and $200 debit
  • Technical display for daily chart
  • EMA’s – 10, 20 and 50
  • Positions held
  • Bullish momentum = 1 put credit spread
  • Bearish momentum = 1 call credit spread
  • Neutral = 1 call spread and 1 put spread

Determining direction and opening/closing positions

  • When EMA’s line up bullish (10>20>50), sell 1 put spread
    • Bullish exits:
      • Profit target – close and open new put spread at 75% profit target (of credit originally received on the short strike)
      • Stop loss – close and open new put spread at 200% loss (of credit originally received on the short strike)
  • When EMA’s don’t line up in order enter 1 call spread and 1 put spread. If you already have a put or call spread on due to previous bullish/bearish stance, keep this on and add the other side.  Each spread/side is managed separately.
    • Neutral exits:
      • Close and open new call or put spread at 75% profit target of short strike credit received
      • Close and open new call or put spread at 200% loss of short strike credit received
  • When EMA’s line up bearish, sell 1 call spread
    • Bearish exits:
      • Profit target – close and open new call spread at 75% profit target of short strike credit
      • Stop loss – close and open new call spread at 200% loss of short strike credit received
  • Note: If a stop loss is taken, and the entry condition is still true, then re-entry is taken.

Hypothetical trades are given for educational purposes. Read additional important disclosures.